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Offered by: Dolan & Associates, P.C.

With the holiday season approaching you may be considering making year-end charitable gifts to help those less fortunate or to support worthy causes. When making charitable gifts, you should put together an effective strategy to maximize the benefit to the charity, reduce the amount going to the IRS, and lower your cost of giving.

Give smart. Look at making a contribution of an asset that has appreciated in value. Giving appreciated stock directly to the charity avoids your tax on the gain. You can get credit for the full amount of the gift, the charity does not pay any tax, and less goes to the IRS. Your cost of the gift is reduced.

The Standard Deduction for married couples could be as high as $27,800 in 2021. If you don’t itemize your deductions, there may not be a tax benefit to your charitable giving. If so, consider making the gift directly from your IRA to the charity. It counts as an annual required distribution, and you don’t have to report the transfer as income. This effectively makes the gift deductible even if your deductions do not exceed the Standard Deduction.

Also, consider making all of your charitable gifts every other year. Bunching your annual gifts together can put the total over the Standard Deduction that year. You can also give several years to a Donor Advised Fund (DAF) this year. You then direct your regular annual gifting out of the DAF and make no gifts during the following years. The charity gets the same amount each year, but you get to take the deduction for the larger amount this year. If you’re not sure what’s best, contact your tax advisor.

Charitable giving is one of many important considerations when planning your estate. If you would like to learn about an estate planning process that is producing great results for families, visit www.EstatePlans to sign up for a complimentary educational workshop.

Dolan Associates