By. Rev. Keith E. Lawder, Georgia United Methodist Foundation President and CEO
I love the last few months of the year. It is a time to reflect on the past, to give thanks for our blessings, and to look forward to the hope and promise of Christmas and a new year. It is a time for giving presents and a time for financial planning for the year ahead. The end of the year is an ideal time to consider some new giving strategies that benefit others and may help your tax planning. Here are several ideas from publications I have read on charitable giving.
- Make a Qualified Charitable Distribution to a charitable organization directly from your IRA. Did you know that a cash gift made directly from your IRA eliminates the taxable income from that part of a distribution you give to a qualified beneficiary, regardless of whether or not you itemize? Your generosity may save some tax dollars if your mandatory distribution is more than you need. There are restrictions. You must be 70 ½ or older, and there is a maximum contribution amount of $100,000.
- Consider establishing a Donor-Advised Fund (DAF). Foundations such as ours can help you set up a DAF. A DAF allows you to make a gift to the fund in one tax year and request grants from that fund in another, which amounts to prepaid giving. This strategy can be beneficial if you know you want to make future contributions but are still determining the amount, timing, and beneficiaries. Grants from DAFs have certain restrictions. They must be directed to 501(c)(3) charities, for example. Likewise, there are often minimum amounts required to set up a DAF.
- Donate noncash gifts, which can also benefit both the giver and the recipient. Suppose you wish to make a gift to a favorite charity but do not have the cash on hand to make the gift now. Perhaps you hold an investment that has appreciated in value, such as land or a holding in a particular stock. If you sell the asset, you may be required to pay tax on the gain. If, however, you donate the asset, you may be able to deduct the market value as a gift this year without having to pay tax on the gain.
These are just a few suggestions to consider when you are thinking about year-end giving. It is always a good idea to consult your attorney or tax advisor about specifics to determine the best option for your situation and to ensure compliance with related IRS regulations. We at the Foundation would be happy to discuss these and other planned giving ideas with you.