The end of the year can be a good time to
review important financial matters, including one's charitable
gift
commitments. For many people this will be especially true in 2004.
The past year has seen changes in tax laws and other factors that
can influence when and how we make our charitable gifts. Careful
planning today can help you balance your personal and philanthropic
goals for the remainder of the year and beyond.
Now may be an opportune time to examine the amount
and timing of your gifts in order to maximize your tax savings
this year.
Your charitable deductions are one of the few tax-saving opportunities
that are totally within your control.
Recently enacted tax law changes have reduced tax
rates for most Americans. By carefully planning your charitable
gifts
and completing them by December 31, you may find you can even
further reduce the amount of tax you will owe next April.
- Cash. Charitable gifts are most
often made in the form of cash and checks. If you itemize your
tax deductions, gifts of cash
can serve to eliminate tax on up to 50% of your adjusted gross
income (AGI).
- Appreciated property. Giving securities (individual stocks,
bonds, and/or mutual funds) and certain other types of property
that have increased in value can bring extra tax savings. Such
gifts provide multiple tax benefits. Not only are they generally
deductible from income tax at full fair market value if owned
for longer than one year, giving in this way also enables you
to bypass capital gains tax that would otherwise be due if the
donated asset were sold. Gifts of such assets are deductible
in amounts up to 30% of AGI.
Tax Savings Checklist |
Property Donated |
Income Tax Savings |
Capital Gains Tax Savings |
Deduction for Loss |
Estate Tax Savings |
| Cash |
x |
|
|
|
| Gain Property |
x |
x |
|
|
| Loss Property |
x |
|
x |
|
| Retirement Assets |
x |
|
|
x |
| Life Insurance |
x |
|
|
x |
| Gift by Will |
|
|
|
x |
If you believe a security will continue to increase
in value, you may wish to donate it and use the cash you might
have used
to make your gift to instead repurchase the same investment.
In so doing, you continue to own the same security, but you enjoy
a new, higher cost basis. As a result, you could have less gain
to report on a future sale at a higher value. You may also benefit
from deducting losses should the security decline in value in
the future.
- Depreciated property. If you own
an investment that has decreased in value since you
have owned it, consider selling it and making a charitable gift
of all or a portion of the cash proceeds. In addition to an
income tax deduction for the cash contribution, this creates
a loss you may be able to deduct from other taxable income.
The combined amount of the deductible loss and the charitable
deduction could actually total more than the current value of
the investment.
Whether you make your gift in the form of cash or other property,
deductions may reduce your taxes in as many as six years. Your
financial services provider can furnish you with additional information
and the forms necessary to complete your gift in a timely and
tax-efficient manner.
As a result of recent tax legislation, most Americans
find they can now leave more to loved ones free of federal estate
and gift
taxes. This may make it possible to give more for charitable
purposes both now and as part of your long-range financial plans.
As you review your plans in light of tax law changes, you might
wish to consider the following alternatives:
- Gifts with retained income for you or
others. A number of methods
exist that allow you to make charitable gifts while providing
increased income for you and/or others, along with current and
future tax savings and other financial benefits.
- A gift through your will or living trust. After
providing for loved ones, you can direct that a specific amount,
a certain
property, or all or a percentage of what remains be devoted to
charitable purposes you choose. There is no limit to the amount
of charitable gifts that are deductible for gift and estate tax
purposes.
- Gifts of retirement plan assets. Recent
federal tax law changes and proposals are designed to make charitable
gifts from retirement
plans even more attractive and simple. Under the right circumstances,
gifts of these assets can be made to charity on a a tax-free
basis during and/or following your lifetime.
- Gifts of life insurance. If you
own life insurance policies that have built up cash value but
are no longer needed for the
purpose for which they were intended, such policies can make
excellent charitable gifts. In addition to providing income tax
savings today, gifts of all or a portion of the value of life
insurance can also result in significant estate tax savings.
As you can see, there are many ways you can make meaningful
charitable contributions by carefully planning the timing of
your gifts and the property used to fund them. We will be pleased
to provide more information to you and/or your advisors as you
act to complete your plans this year-end.
Neither the author, the
publisher, nor this organization is engaged in rendering
legal or tax advisory service. For
advice and assistance in specific cases, the services of
an attorney or other professional advisor should be obtained.
The purposed of this publication is to provide general
gift,
estate, and financial planning information. Watch for tax
revisions. State laws govern wills, trusts, and charitable
gifts made
in a contractual agreement. Advice from legal counsel should
be sought when considering these types of gifts.
2004 Annual Report (
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