Plan for Tax-Wise Year-End Giving
As many of us begin to consider charitable donations to make before 2016 comes to a close, Director of Gift Planning Susan Peterson shares some considerations to think through your year-end giving.
December 09, 2016
By Susan Peterson, Director, Gift Planning
The December countdown to year-end is on and it’s the time of year when many of us begin to consider the charitable donations we wish to make before 2016 comes to a close. Of course, there are many ways of deciding when and how to support the organizations and causes that are important to you; however I would like to highlight a few considerations that I hope will be helpful as you are in the process of thinking through your year-end giving.
--You may consult your CPA (or do some “number crunching” on your own) to determine whether there is an “optimal” amount of charitable giving this year from an income tax perspective. You may benefit from additional income tax charitable deductions associated with your gifts, depending upon your tax situation. This can be particularly helpful in high-income years, if you have received higher-than-usual compensation from employment or have incurred taxable gains from the sale of a business or asset. In addition, some commentators believe that in light of the recent election, charitable deductions might more be valuable in 2016 than in later years, due to potential changes in the tax laws. (For more information, see the summary prepared by Seattle Foundation’s accountants, Clark Nuber). Opening or adding to a fund at Seattle Foundation is a convenient way of obtaining an offsetting charitable deduction and “pre-funding” future years’ charitable giving.
--For the first year in quite some time, the so-called “IRA Charitable Rollover” is a permanent part of the tax code. If you are over age 70 ½, there is no need to wait until the last minute to learn if you are able to direct some or all of your IRA required minimum distribution (up to a maximum of $100,000 per taxpayer) to the public charity of your choice. This option is not available for contributions to donor advised funds; however, if you have a designated fund (established to support a particular philanthropy) or if you wish to make a gift to support Seattle Foundation's community impact or grantmaking, you may make your gift to Seattle Foundation utilizing this beneficial tax rule.
--Whatever the size of your donations, be sure to consider using assets other than the cash in your bank account. Charitable contributions of appreciated assets such as low-basis publicly traded stock or investment property can be an excellent way to save taxes and maximize the benefit you provide to the organizations that you support. If you were to sell the asset and donate the proceeds, you would likely incur a taxable capital gain and the amount the organization would receive would be reduced by the amount of the taxes due. Instead, think about donating an appreciated asset and let the charity sell it tax-free and employ the full fair market value in furtherance of their mission.
--In addition, some public charities, including Seattle Foundation, are able to accept complex assets. Seattle Foundation facilitates this type of gift through its affiliate, TSF Properties, which holds the complex asset until it can be liquidated and the net proceeds added to your fund at Seattle Foundation. One common form of complex asset is real estate (residential or investment); however, we can also accept a broad range of other non-cash assets, including business interests, art and collectibles. We have even accepted Krugerands and classic cars. The costs of maintaining the asset pending sale and any costs of sale are deducted from the net proceeds when the asset is liquidated. Even so, the resulting funds available to advance your charitable goals is often significantly greater than if you had sold the asset yourself and paid any associated taxes.
If you have any questions regarding year-end giving, we are happy to work with you and your team of professional advisors to determine the most tax-effective plan that meets your needs. Contact Susan Peterson at email@example.com or 206.515.2127.
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