Tax Partner
When thinking about charitable giving there are many options and opportunities in addition to donating cash to your favorite charity. Highlighted here are just a few alternative strategies that may be worth looking into.
Donation of Highly Appreciated Stock:
- The donation of highly appreciated stock allows for the avoidance of having to recognize the capital gain from the sale of the stock, yet you can still receive a charitable deduction at the fair market value of the stock.
- In order for this to work the stock needs to be donated directly to a public charity.
Required Minimum Distribution (RMD) donations:
- Each Year, an IRA owner age 70 ½ and older with a required minimum distribution from their account can exclude from gross income up to $105,000 for 2024 ($210,000 for married couples) by making a qualified charitable donation (QCD).
- QCD’s count toward the IRA owner’s RMD for the year.
- Normally, distributions from a traditional IRA are taxable when received.
- A QCD becomes tax-free as long as they’re paid directly from the IRA to an eligible charitable organization.
- You can also use up to $53,000 for a QCD to make a one-time donation to a Charitable Remainder Trust (CRT) or Charitable Gift Annuity (CGA).
Private Foundations:
A private foundation is a type of charitable organization generally started by family, individual, or even a corporation to support charitable activities.
- The majority of foundations are set up to exist in perpetuity and can be used to leave a personal and family legacy.
- Control over the foundation and its assets can be passed through generations.
- Immediate tax deduction up to 30% of adjusted gross income (AGI) for cash gifts and up to 20% of AGI for long-term appreciated securities.
- Ability to accept many types of assets including real estate.
- Investment income subject to 1.39% tax.
- Tax return requirements each year.
Donor Advised Funds (DAF):
A DAF is a charitable investment account that allows donors to contribute money to a charity through a third-party entity:
- Contributing to a DAF allows for immediate tax deduction.
- Can designate charities to provide funds to in a year other than when the deduction is allowed.
- The funds remain in the DAF until the donor decides how they want them used, which can be months or even years.
- You can recommend investment strategy and donations for a DAF but ultimately this will be chosen by the DAF.
- Relatively easy to setup and no tax filings needed.
Please contact your WFY advisor or contact us here to discuss your charitable options so we can assist with providing strategic planning. There are other strategies including Charitable Remainder Trusts and others depending on your specific situation. You can also sign-up for our newsletter here to receive more updates.
Wright Ford Young & Co. is headquartered in Irvine, CA and is one of the largest local CPA firms in Orange County. WFY is a full service corporate accounting firm offering audit, tax, estate and trust, and business consulting services to closely held company and family business owners. More information about our Firm can be found at www.cpa-wfy.com.