The holidays often inspire Donors to think about gifts to their favorite charities. As 2014 draws to a close, there isn’t much time remaining to implement structured charitable gifts. However, there are a few techniques that can be put in place fairly quickly.
Contributions of cash are quick and easy, and are subject to a limit of 50% of Adjusted Gross Income. Year end is a good time to review charitable travel expenses that might be deductible: transportation at actual or 14 Cents/mile, meals & lodging. Tally up your volunteer out-of-pocket expenses which may be deductible.
Gifts of property held for more than a year are a little more complex and take more time when securities are involved. Donating long term capital gain property like publicly traded securities can avoid capital gains tax, as the deductible value of the gift is the current Fair Market Value. The deduction of long term gain property is limited to 30% of Adjusted Gross Income.
Donations of ordinary gain or short-term gain property are generally avoided. The donation can avoid inclusion of gain in gross income if the property would otherwise be sold, but the deduction is limited to the adjusted basis in the property. The deduction of short term gain property is limited to 50% of Adjusted Gross Income.
Charitable Gift Annuities are popular with older donors. Many public charities offer Charitable Gift Annuities and they can be set up fairly quickly. The Donor contributes an asset (usually cash or securities) to create the annuity and receives fixed annuity payments based on IRS life expectancy tables. The current year tax deduction for the contribution is the value of the asset adjusted for the value of the annuity payments. The taxability of the annuity payments depends on the nature of the original asset contributed; the payments may be a combination of ordinary income, capital gain, or tax-free return of principal; and composition will change over time.
Donor Advised Funds have seen a boom in the last few years. A Donor Advised Fund is a charitable investment vehicle administered by a public charity whose sole purpose is to distribute donations to qualified charities. The Donor establishes an account by making an irrevocable, tax-deductible contribution to the fund. The Donor can advise or recommend grants to be made from the account, but grants are not required to be made. Assets in the account continue to grow tax-free, and the Donor can continue to contribute to the account.
Please feel free to contact us if you have any questions.
Best wishes to our readers and colleagues from the team at LeverageYourGift,
Norm, Mark & Cindy
Disclosure: Mark Kluge only offers securities and advisory services through Wall Street Financial Group, Inc. (WSFG), Registered Investment Advisor. Member FINRA/SIPC. WSFG and BlueMark Advisors are separate entities, independently owned and operated.
Securities offered through Securities America Inc., Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. BlueMark Advisors and Securities America Companies are separate companies. Mark Kluge is licensed to discuss and/or sell securities in the following states: CA, FL, MA, NY, OH. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax and/or legal advisor regarding your specific situation. Please see disclosure page for full additional disclosures.