We are continually inspired by your desire to be generous, and it is our privilege to help you find ways to realize your charitable objectives. Foster Group can help by simplifying the mechanics of giving and reducing the tax consequences of your gift, allowing you to maximize your charitable contributions.
Giving appreciated shares of securities (stock, mutual funds, etc.) could be of benefit to you, especially if you happen to be in the 39.6% tax bracket and subject to 20% capital gains tax or the additional 3.8% Net Investment Income Tax. The fair market value (FMV) of shares of securities given to charity (as well as the FMV of real estate, collectibles, and some business interests) can be deducted on your Federal tax return up to 30% of your Adjusted Gross Income (AGI). One way to take advantage of this tax benefit is to contribute appreciated shares to a donor-advised fund (DAF). Because the DAF is, itself, a charitable organization, you receive a charitable contribution deduction for the FMV of your contribution for the current tax year. From the DAF, you can recommend grants to charities of interest to you. Checks are then issued on your behalf. Some DAFs, such as our LifeWealth DAF, are pass-through accounts that accept your gifts and immediately direct a grant to the charity of your choice. Individual DAFs are unique to you and can maintain an account balance over time.
If you would benefit from reducing your Iowa state income tax burden, you can endow your favorite Iowa-based charities and receive an Iowa tax credit for 25% of the value of your gift. Your gift is tax-deductible and you can carry forward any unused Iowa tax credit for five years. We can help you open your own Endow Iowa fund at the Community Foundation of Greater Des Moines, or you can contribute to an existing Endow Iowa fund established by one of your favorite Iowa charities.
In December of 2015, the Consolidated Appropriations Act of 2016 made permanent the Charitable IRA Rollover, which allows those over age 70-1/2 to make charitable gifts directly from their IRA. Gifts from an IRA count toward satisfying an individual’s Required Minimum Distribution (RMD) and are also free of federal income tax (normally RMDs are taxed at ordinary income tax rates). This is an option to consider if the income tax avoidance is of greater benefit to you than the charitable deduction; you don’t get both, just one or the other.
Generosity is its own greatest reward, but there can be additional benefits such as charitable tax deductions, tax credits, or capital gains tax avoidance which may allow you to maximize the impact of your gifts. In this article we discussed a few available options. Below, we will look at similarities and differences between our various DAF platforms. Please feel free to contact us at any time if you would like more information on a DAF or if you have questions about charitable giving, in general.
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