December, and the holiday season in general, is often referred to as "The Giving Season" and for good reason. Thorough it falls on November 28th in 2023, in years past Giving Tuesday fell in early December. Holiday bonuses are usually received in December. Last minute tax breaks can be achieved by making a charitable contribution before December expires. Whatever the reason you'd like to help, here are few ways - other than stroking a check, to be philanthropic.
Important Notes: Some of these techniques take time to implement. Start in November to be sure it is complete before year end. And, before implementing any of these techniques, consult your attorney, tax preparer, financial advisor or IRS Publication 529, Charitable Contributions, for more information - again, do this before you give!
Volunteer your time, talent, expertise or skills. Sometimes active participation is exactly what the charity wants or needs. Think charities like Habitat for Humanity and Big Brothers, Big Sisters. Such active participation not only helps others, it also brings community involvement and a sense of accomplishment. Though you can't deduct any personal expenses or fees for your services; if you itemize on your tax return, there are some expenses you can claim on your tax return. For example, you can deduct the cost of meals if your service keeps you away from home overnight. Or, the cost of gas for your car or boat.
Give Art or Other Collectibles. Sometimes the charities don't want cash. Got art? Got antique furniture? Got jewelry? Got Books? Got old old photos? Local historical societies, museums and libraries are always looking for items of this type. If you've owned the item for more than a year and it has appreciated in value and you itemize on your tax return, you might be able to use the donation to eliminate the tax on that capital gain. It can be like winning a trifecta. When you donate the item; you can help the charity, you can claim the charitable donation on your tax return, and you can reduce the value of your taxable estate.
Transfer Stock. Bought a little Amazon, Google or Tesla years ago? As with giving art and collectibles, giving appreciated stock helps you eliminate the capital gains tax you would incur if you sold the stock and gave the sale proceeds to charity. Transferring the actual shares to the charity can increase the value of your gift by your capital gains tax rate be it 15% or 20% for 2023 or even up to 23.9% in 2026.
Give Part of Something. Not ready to part with your money or "stuff" yet? Can't afford to just give it away now? You can give a part of a thing to charity now and keep the rest. Or you can keep it all for now and give the charity a right to own it or a portion of it in the future. This is frequently done with assets such as a business, home, commercial property, or investment account.
This type of giving can be as simple as keeping your IRA (Individual Retirement Account) and just giving your annual RMD (Required Minimum Distribution) to a charity every year (Qualified Charitable Distribution). You will need to work with your financial institution to do this.
Another way to donate when you just can't afford to give away the whole "thing" right now is a part sale/part gift technique called the "Bargain Sale". In a Bargain Sale you sell the asset to the charity for a deeply discounted value. For example, you might sell a $1,000,000 piece of real estate to the charity now for $500,000. The tax impact of this technique can get a little tricky, so consult your tax advisor before you negotiate the sale with the charity.
Make a Time or Controlled Gift. There are other common techniques which allow you to control exactly who gets it (which charities), what the charity gets, when the charity gets it, and how the charity gets it. These techniques include the Charitable Remainder Trust, Charitable Lead Trust, private foundation and Donor Advised Fund. These techniques are suitable for cash, art, collectibles, business(es), homes, commercial properties, and investment accounts. The technique you use will determine when and how much of a charitable tax deduction you can claim.
No matter how you'd like to give, we can help you identify an appropriate charitable giving technique. Give us a call at (904) 705-7355 to chat about charitable giving.
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