If you have questions about your giving options and would like to learn more, please contact us at (320) 253-4380.
Outright Gifts: Cash, property and stocks can be used to make gifts to establish or add to a fund. When individuals donate property or appreciated or closely held stocks, they may be eligible for a tax deduction based on the fair market value and they may also avoid capital gain and estate taxes.
Bequests: Naming CommunityGiving or any of our partner foundations as a beneficiary in a will is often the easiest way to make a significant gift. In addition, a gift will often reduce estate and transfer taxes.
Life Insurance: If a donor wishes to name CommunityGiving or any of our partner foundations as the sole or partial beneficiary of a life insurance policy, the charitable proceeds of the policy may avoid both income and estate taxes. Another option is to transfer ownership of a policy to CommunityGiving. By choosing this option, donors may take an immediate income tax deduction approximately equal to the policy's surrender value.
Retirement Plan Assets: Using IRAs and other retirement plan assets is a far-sighted and thoughtful way to make a charitable contribution. It provides a donor a number of significant financial and tax advantages. Unlike many assets, retirement plan assets are potentially subject to both income and estate taxes. Naming CommunityGiving or any of our partner foundations as the beneficiary of a retirement plan (including IRAs, 401(k)s and profit-sharing plans) can eliminate estate and income taxes, if the gift is structured properly.
A donor makes an irrevocable transfer of assets to your family fund at CommunityGiving or one of our partner foundations and in return receives a lifetime payment for a specified beneficiary (the donor, spouse, children or friends). Upon the death of the beneficiary, the assets are used for the charitable purposes of CommunityGiving or the named partner foundation. The donor receives a current income tax charitable deduction for the remainder value of the charitable gift. These gifts, known as life income gifts, include the following:
Charitable Remainder Trust: Cash or property is transferred to a trust, which pays the beneficiary either a variable income equal to a fixed percentage of the trust's fair market value as determined each year or a fixed annual amount. Upon the death of the beneficiary, CommunityGiving or one of our partner foundations receives the remaining assets assuring that they will be used for the purposes specified by the donor.
Charitable Gift Annuities: Cash or other property is contributed to CommunityGiving or one of our partner foundations in exchange for a commitment to pay the donor, or other beneficiaries, a specified annual amount for the remainder of the beneficiary's life.
Deferred Gift Annuities: A deferred gift annuity is the same as a charitable gift annuity, but the payments of income are delayed until a pre-determined time.
|You have likely heard that the Tax Cuts and Jobs Act, which went into effect December 2017, increased the standard deduction from $12,700 to $24,000 for married filing joint returns. This change significantly decreases the advantage of claiming many itemized deductions, including charitable contributions. |
Many professional advisors are recommending their philanthropic clients establish a donor advised fund and “bunch their gifts” every other year or every few years to take advantage of the charitable deduction in certain years and use the standard deduction in the other years. The charitable deduction is received in the year that money is donated to the donor advised fund, but the donor through making grant recommendations determines the timing of distributing the money to the final charities. A donor advised fund can therefore distribute grants on an annual basis which provides consistent support to the nonprofits the donors care about.
To understand the example, let’s assume that John & Mary Smith’s typically gift $10,000 per year to nonprofits. They would like to take advantage of the tax deduction for their gifts. They could choose to fund a donor advised fund in January for $15,000 and another $15,000 in December 2018. For the 2018 year, the Smith’s will have at least $30,000 in itemized deductions so they will likely choose to itemize their deductions. In 2019 they would then likely simply take the standard deduction because their itemized deductions are under the $24,000 threshold. They can still disburse their normal amounts to the charities in 2018 and have a remaining $15,000 available to distribute in 2019.
Here's another example of how bunching charitable gifts can provide greater tax savings.