Category Archives: tax planning

Are Charities in Trouble?

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Retirees are consistently charitable. They are the largest group of Americans supporting the many non-profits and charities that rely donations for survival. So what happens now that the new Tax Overhaul Bill is a reality?

Retirees that used to itemize deductions used their property taxes, perhaps state income taxes, and their charitable contributions to reduce their taxable income. Now, there are two fixed levels: $12,000 for individuals; $24,000 for married couples. So the question for charities now is, will the benefit of those charitable contributions disappear? Maybe not.

It’s nothing new, but the strategic method for those 70-1/2 and older to reduce taxable income by giving their entire RMD (Required Minimum Distribution) directly to charity is still a good one. But now, you might want to give twice as much every other year if that results in an amount to write off that is larger than the standard deduction.

Let’s say you are retired but not yet 70-1/2. You don’t have a Required Minimum Distribution, but you may want to take a distribution (earmarked for a charity) in order to avoid being in a higher tax bracket. It’s a painless way to give to charity or support the causes and missions that you care about so deeply.

For certain income levels, you might want to consider a Donor-Advised Fund (DAF). These funds—sort of like personal private foundations, without all the legal and accounting costs—allow contributors to donate money and take a tax deduction in the same year, then pay the money to selected charities over time. There are interesting advantages for a DAF. If you missed the 2017 cut-off, you might want to have a conversation with us to see whether either RMD or DAF plan could be to your (and your charity’s) advantage going forward.

Call us for free, no-obligation consultation or refer us to a friend you know who may need our expertise and experience.

The Joy of Stewardship

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After taking a look at the financial state of Americans, we were moved to reflect on the biblical passage that was literally the foundation of the Stewardship Foundation—the story of the good and faithful servant in Matthew’s Parable of the Talents.

money-card-business-credit-card-50987The average American gross income is currently $71,258. That seems like good news until we realize that the average American household with a mortgage and other loans is $132,539 in debt, including an average $16,061 on credit cards.

According to IRS data for 2015, only 30% of Americans claim a charitable contribution deduction on their taxes. We might assume that some who didn’t itemize their deductions also gave, simply because Americans are generous to those less fortunate.

It’s good to remind our younger generation that they should carefully choose how they give. For example, only donations to qualified charitable organizations are deductible. If you’re not sure, we can verify this for you, or you can search for a charity on a site like Charity Navigator.

While handouts to the homeless or contributions to GoFundMe are worthy acts of charity, these are considered “personal gifts” and are not deductible. You may remember the 2015 news story about Casey Charf. While being treated in the hospital for a car accident, Casey’s doctors found she had a rare, seemingly incurable cancer requiring immediate treatment. The $50,000 she and her sister raised on GoFundMe triggered a $19,000 bill from the IRS.

When you give, keep receipts, even for cash. The same applies for payroll deductions should your employer run a charitable giving campaign. Remember too that if you receive something in exchange for your donation, whether a basket of goodies at a silent auction or a t-shirt, you have to deduct the fair market value of the incentive gift.

One of the most important charitable avenues often overlooked is giving appreciated assets. Donating property that has appreciated in value, like stock, can be highly beneficial. Call us if you want to explore how to receive a double benefit from donations of appreciated assets.

Do either our giving patterns or our own money problems, real or perceived, prevent us from remembering whose resources we’re managing? Are not our time, talents, skills, and health all tools to help us share with others, do good for others, and use them to glorify God? We exist to help others find the joy in stewardship in practical, financially beneficial ways, but also because it’s our credo and commitment to God.

Don’t Give to Charity, Grant to Charity

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thank-you basketMost Americans are generous. We support our churches and step up to the plate during times of natural disasters. We give to United Way at work, donate goods and cash to the Salvation Army, and many respond to televised pleas for support especially when it involved children or pets. Americans have big hearts, and giving makes us feel good. It also allows for a break on our tax return!

But do you give strategically? Have you taken the time to think through how you can best help the causes you care most about? Giving strategically means “giving with goals in mind”—a way to support a charity, or several charities, that you love.

A Donor-Advised Fund (DAF) is a charitable account that acts as a charitable savings account. You make an initial deposit that is immediately tax-deductible, then use it to make grants out to qualified 501(c)(3) charities when you wish. The magic of grants is that you can specify how you want your money to be used by the charity.

You may be able to give more than you think! You can fund your DAF account with cash; that’s better than having it taxed. Yet you can increase your giving by putting to work your non-cash assets like stocks, real estate, IRAs, whole life insurance policies, art collections, and other tangible personal property. You keep your assets in the family, and allow their value to help others during your lifetime!

There are legitimate reasons to keep your giving private. We find that some business owners with staunch moral convictions prefer to keep information about which charities they support private. Unlike giving from a private foundation, a DAF allows them to increase their giving capacity at a fraction of the cost, without all the legal, tax and regulatory burdens, and never having detailed tax records made public.

If a strategic giving plan sounds interesting and solves some organizational, administrative, or privacy issues for you, call me today at (614) 800-7985 or reply to this email. And please, share this blog from Stewardship Foundation with someone you know. Together, we can make the world a better place.