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Three tips for year-end charitable giving

November 16th, 2016

by Brook H. Lester, CPA, Principal & Chief Wealth Strategist, Diversified Trust 

The last year has been very exciting, with one of the most interesting presidential campaigns in recent memory. The candidates discussed changes that would impact every area of the tax code, including the value of charitable income tax deductions. Specifically, President-Elect Trump focused his proposals on lowering tax rates for most tax payers, including individuals. Lower tax rates are a good thing from most people’s perspective, but it does decrease the value of tax deductions. Assuming lower rates are coming, now is the time to fund your charitable ambitions to get the most income tax benefit for the contributions. A few ways to consider making your contributions are:  

Create a donor-advised fund

Creating a donor-advised fund, or contributing to your existing fund, is a great way to make year-end gifts. Donor-advised funds offer the ability to make a current income tax deductible charitable contribution and determine the charity that will benefit from your contribution at a later date. Learn more about opening a donor-advised fund.   

IRA charitable rollovers

IRA charitable rollovers were initially created by Congress in 2006 and made a permanent part of tax code at the end of 2015. This technique allows individuals who are 70½ years old to make contributions directly from their IRA to a charity. It is limited to $100,000 annually, but the contribution does count towards the individual’s required minimum distribution (RMD). Making the contribution directly to charity prevents the RMD from being included in the income of the individual and limits the impact of numerous disadvantageous gross income based tax provisions.  One downside of a charitable rollover is you cannot make the contribution to your donor-advised fund, it must go directly to the charity.

Appreciated property

In addition to choosing the method of making a charitable gift, the type of property contributed to the charity must also be determined. One of the most logical assets to contribute is appreciated marketable securities. Giving appreciated securities allows the taxpayer to avoid recognizing the gain. This permits a larger charitable contribution since income tax will not have to be paid on the gain with only the after-tax proceeds going to charity. 

There are many options to fulfill your charitable goals and these are just a few examples of easy ways to begin the process. These will allow you to help your community and maximize the income tax benefits of making the contribution. Finally, as with anything tax related, you should consult with your tax advisor to determine how each of these options might impact your tax situation. 

Brook H. Lester, CPA

As Chief Wealth Strategist, Brook designs and directs Diversified Trust’s wealth strategies offering which includes trust, estate, tax and business planning. Prior to joining the company, Brook was a Director with Deloitte Tax LLP and served as the Southeast region leader of estate, gift, trust and charitable planning services for high net-worth families and closely held businesses. Prior to Deloitte, he practiced estate and tax law with a regional firm and worked with another international public accounting firm.

Brook graduated from the University of Mississippi with a Bachelor of Accountancy and a Juris Doctor. He is a member of the Tennessee Bar Association as well as the Mississippi Bar Association. He is also a member of the Tennessee Society of Certified Public Accountants, the American Institute of Certified Public Accountants, and the Memphis Estate Planning Council. Additionally, Brook is a member of Christ Methodist Day School Board of Trustees.

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