Tax strategies told for charitable giving
With our 2018 tax returns newly filed, you may have found that you could take the new, higher standard deduction instead of itemizing deductions. While it’s a lot faster and easier to file your return that way, the downside is that you aren’t receiving a tax benefit for charitable giving. But here
are some tips to help you restore that tax benefit, even if you don’t itemize.
If you are over age 70 ½, have a portion of your IRA’s Required Minimum Distribution paid directly to your favorite charity, according to the Qualified Charitable Distribution rules. Those rules require that you have the charitable gift sent directly from your IRA to the charity. The gift amount is then excluded from the taxable amount of your RMD. Be aware, though, that your IRA custodian is not required to report the QCD on your annual 1099, so you must tell your tax preparer to ensure it is properly reported as a reduction of taxable income.
Perhaps you would like to
leave some of your assets to a
charity after your passing. Instead of naming a charity directly in your will, name it as a beneficiary on your IRA accounts. Why? Pre-tax IRA accounts are fully taxable to your heirs, whereas non-IRA accounts get a “stepped-up basis” at your passing.
The step-up wipes out any embedded gains so your heirs don’t pay income tax on those accounts. It makes good tax sense to give an IRA to a charity, who by definition doesn’t pay any income taxes, while leaving the stepped-up assets to your family.
You don’t have to give the whole IRA to your charity — you can allocate as little as 1 percent on your beneficiary form and you can change the form anytime.
Lastly, if you have appreciated investments, give those assets to a charity rather than cash. Once the charity receives the investments, they can sell them without recognizing any taxable gain.
And you get a charitable deduction for the full market value of the donation. It’s a win for both you and the charity.
Financial Planning & Investment Advisory Services are offered through Marsh Wealth Management, LLC, an independent investment advisor registered with the state of Tennessee. Yvonne Marsh is an Investment Advisor Representative of MWM in the state of Tennessee. Marsh Professional Group, LLC is a TN registered public accounting firm and a separate legal entity from MWM. For a detailed discussion of MWM and their investment advisory fees, see the firm’s Form ADV on file with the SEC at www.adviserinfo.sec.gov.
