Tax Breaks for Donors Who Don’t “Itemize”
According to IRS statistics, only one-third of taxpayers “itemize” deductions, with the rest taking the standard deduction. That means two-thirds of the people who give to worthwhile causes and institutions can’t take advantage of charitable deductions.
Tax savings aren’t why people give to worthwhile causes, of course, but they may play a role in how much supporters feel they can contribute. Here are some ideas that can help you make the most of your generosity, even if you don’t itemize:
• Donors over age 70½ can make direct gifts from IRAs (qualified charitable distributions) that save taxes in 2013, to the extent they replace your required minimum distributions. Charitable deductions aren’t needed to achieve these tax savings.
• Give stocks and other assets that have gone up in value instead of cash. You’ll avoid capital gains taxes that would come due upon a sale. You also can fund a charitable gift annuity with highly appreciated stocks, reduce capital gains taxes and receive fixed lifetime payments that are taxed at low rates.
• You can arrange a charitable gift annuity and tell us you would prefer larger tax-free payments to a large charitable deduction (that may be unusable). In many cases it's possible to boost the tax-free amount.
• Annual donors often can join the ranks of itemizers by making several years’ worth of future gifts all in one year. For example, you might bunch your 2014-2018 contributions all into one large 2014 gift – preferably using appreciated stocks. Another strategy is to make a large, tax deductible gift to a donor advised fund, followed by annual grants to the charities you support.
• Friends who have included us in their estate plans sometimes decide to make those gifts now, so they can see their generosity at work while they’re alive. Such gifts are often large enough that they can be deducted and provide a tax-saving bonus.
• Donors also can divert interest and investment income to benefit our programs before it gets taxed by means of interest-free loans and charitable lead trusts.
We should add that a person’s lifetime gifts may also reduce state and federal estate taxes and future probate costs.
The materials contained on this website are intended only to show some ways by which you can make a charitable gift or bequest and thereby minimize federal tax liabilities, as authorized by the Internal Revenue Code. All examples are of a general nature only and should not be applied to your specific situation without first consulting your attorney or other advisers.
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