Make the Most of Your Year-End Charitable Giving
With 5777 in the rear view mirror, it’s time to look ahead to the end of 2017.
Now is the time to plan your year-end charitable contributions and tax credits, especially if you intend to reap the tax benefits of donating appreciated assets. Consider these ideas to make your giving more tax-effective, and to maximize the value of your year-end contributions.
Decide what type of impact you want to make: Understand what you want to accomplish, and whether you want to support many organizations or just a few. Some people enjoy making more modest gifts to a variety of organizations. Others choose just a few organizations so they can make larger donations, which can make a more significant impact.
Get to know the organizations you support: Learn how organizations use their resources, but don’t get too bogged down with overhead and funding expense ratios. Administrative expenses are only one part of the equation. An organization with a relatively high overhead ratio may still be effective in its work, while one with lower overhead may run a less effective program. Look for organizations that are doing the most meaningful work and focus on those.
Donate appreciated assets: To maximize the tax benefit of your generosity, giving appreciated assets can go much further than a simple cash donation. Appreciated stocks, bonds and mutual funds owned more than a year are easy to donate, and may entitle you to a tax deduction for their full value, regardless of the price you paid. By donating these assets, you can also avoid capital gains. Real estate donations and privately held business interests also can be attractive vehicles for charitable giving — but are more complicated, so don’t wait until December to start the process with these assets.
Remember the charitable IRA rollover: Donors 70-and-a-half or older can donate up to $100,000 per year without being taxed on the IRA distributions, and can satisfy their required minimum distributions at the same time. Married couples with separate IRAs can give up to $200,000 per year. This is an especially attractive option for anyone contemplating substantial year-end giving, including the creation of a permanent endowment or gifts to capital campaigns.
Consider a donor-advised fund with the Jewish Community Foundation: This will allow you to donate when it’s best for you, take your tax deduction in the year you donate and recommend grants to nonprofits whenever you like. You can even recommend grants from your donor-advised fund online. These flexible, cost-efficient tools enable you to direct all your charitable giving through one convenient account. Instead of tracking all your charitable receipts throughout the year, you get a single receipt from the Foundation. Plus, your donor-advised fund is invested by the Foundation, so your giving ability grows as your fund grows.
A donor-advised fund is especially attractive if you seek a bigger-than-usual charitable tax deduction in 2017, but prefer to spread your giving into 2018 and beyond.
Create an income stream and a deduction with the same charitable gift: With a charitable gift annuity, you make a charitable gift of cash or property. In return, you or a loved one will receive regular, fixed payments for life. Depending on your gift, some of those payments may even be tax-free. And you receive a charitable deduction in the year that you set up your charitable gift annuity.
Remember Arizona’s charitable tax credits: Arizona taxpayers receive a dollar-for-dollar tax credit for supporting certain public school programs and extracurricular activities, private school tuition organizations, qualifying charitable organizations, qualifying foster care organizations and the Arizona Military Family Relief Fund. Different credits can be claimed in each category, so contact your tax advisor or the Arizona Department of Revenue for details. For all but the Arizona Military Family Relief Fund, contributions made through April 17, 2018 may qualify for a 2017 Arizona tax credit — but the deadline for federal charitable tax deductions is still Dec. 31. Total Arizona charitable tax credits cannot exceed your Arizona tax liability.