Charitable Giving Is Always in Season

KALAMAZOO, Mich. - May 7, 2015 - PRLog -- The holiday season may be far behind us, but it’s never the wrong time to make charitable gifts. And charitable giving is truly a “win-win” proposition – your financial support helps an organization whose work you admire, and your generosity can earn you some valuable tax benefits.

To illustrate on the most basic level how you can gain some tax advantages from making charitable gifts, let’s assume you’re in the 25% tax bracket. If you give $100 to a qualified charity (one that has received 501(c)(3) status from the IRS) and you itemize your taxes, you can deduct $100, with a tax benefit of $25, when you file your taxes. Consequently, the real cost of your donation is just $75 ($100 minus the $25 tax savings).

Of course, you’re not confined to giving cash. For example, suppose you give $500 worth of stock in XYZ Company to a qualified charitable group. You may be able to deduct the full $500 when you file your income taxes for 2015, and by donating the XYZ stock, you can also avoid paying any capital gains taxes you might have incurred if you had sold the stock yourself. Keep in mind that in order to deduct contributions you need to make your gifts by December 31 and be sure to retain your paperwork.

Making charitable gifts every now and then can help you reduce the size of your estate and potentially lower any future estate tax burden on your heirs. But if you wanted to formalize your charitable gifts and help your estate planning, you might consider establishing a charitable remainder trust.

Under such an arrangement, you’d place some assets, such as stocks or real estate, in a trust, which could then use these assets to pay you a lifetime income stream. When you create the trust, you may be able to receive a tax deduction based on the charitable group’s “remainder interest” – the amount the charity is likely to ultimately receive. (This figure is determined by an IRS formula.)

Upon your death, the trust would relinquish the remaining assets to the charitable organization you’ve named. Keep in mind that this type of trust can be complex, so you’ll need to work with your tax and legal advisors before taking action.

Another way to make charitable gifts and obtain tax benefits is through a “donor-advised fund.” By donating cash or appreciated securities to such a fund, you can receive a tax deduction, and you can recommend which charities are to benefit from your contribution. As with a charitable remainder trust, you’ll need to work with your tax and legal professionals before establishing a donor-advised fund.

Your charitable giving can bring positive results to both the recipients of your gifts and to you. An Edward Jones financial advisor can help you determine which gifting strategies are most appropriate for your situation.

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.