As we approach the year’s end, you still have two weeks to give to your favorite charity. Remember, however, that any charitable gifts you wish to make must be received by the charity before the end of the year. Here are important items to keep in mind with two weeks left:
First, set up a donor-advised fund. While the standard deduction has increased to $15,750 for a single taxpayer and $31,500 for a married couple, you should consider a “bunching” strategy, putting as much as you can into a donor-advised fund(DAF). You get a deduction for the amount going in (but not for distributions from the fund). The donor-advised fund sponsor actually owns the fund. You advise the sponsor, (Schwab, Fidelity, etc.) how you want the DAF sponsor to distribute it. The DAF agreement is usually simple. Schwab, Fidelity, many brokerage houses, and many community foundations sponsor them.
Second, give appreciated securities to the charity. If you owned the security for more than one year, you get a deduction for the full value of the security and incur no capital gains tax if the security has grown in value. Do not donate a security that has declined in value.
What happens next year: Next year, the rules change, with limitations on charitable giving. If you itemize deductions, you can only deduct charitable gifts of more than .5% of your adjusted gross income.
If your income reaches the maximum 37% bracket, you can only deduct an amount up to the 35% bracket. You can deduct the excess over 5 years (if you itemize deductions). You can avoid these limitations for the near-term next year by giving them to a DAF this year.
There is still time to help your favorite charity and get a tax benefit. If you have questions, you can call me at 815-298-0664 or email me at jprovenza@provenzalaw.com
