Charitable Giving – Making Philanthropy Part of Your Plan
Maybe you’ve already plumped up your granddaughter’s college savings account and you’d like to give even more to charity next year and in the years ahead. We know how charitable giving works when it comes to tax time (we claim our deductions), but what else should we keep in mind as we approach retirement and still want to give, smart?
Those investments outside of your IRAs? Could be the best way to give. Why? Because what you give to a qualified charity from your non-qualified assets is not subject to capital gains tax. Let’s say you were lucky enough to pick up a great investment at $500 and now have seen it grow to $1,000+. If you cash it out, sell it, you’ll owe capital gains tax on those proceeds. But if you give those shares to a qualified charity, the charity will get the full value and you will not pay taxes on the gains. Make sure you document the gift and receive a formal receipt for the full gift value.
A big part of your giving plan that you should consider as a boost come tax-time should be non-monetary gifts of furniture, an old car, clothing, or even your time. The time you volunteer with and for a qualified nonprofit is not a tax deduction but should be kept tabs on so you can deduct any travel or other expenses you had to make it there and back. Also, if you’re thinking of downsizing, if you’d rather give your old belongings rather than sell them, make an inventory and note condition and possible value then choose a solid charity. You can screen charities at sites like GuideStar.com. If your gifts are worth more than $5,000, you must get an official appraisal from an appraiser and the charity with documentation.
Keep in mind when it comes to actually living in retirement, especially after the age of 70½, you’ll have the opportunity to give to charity directly from your IRAs (a form of roll-over), where just as with non-qualifying investments such as stocks, the charity can benefit from the full gift amount, not the post-tax amount that you’d have to give if it came from your required minimum distribution. If you get $4,000 a month out of an IRA but only see $2,700 post-tax, using a charitable roll-over would net the charity the full $4,000.
Give smart and both you and the charity can end up getting a ‘gift.’ Consult with an independent tax advisor for more information and to review your own financial situation.