2012 Year-end Giving Strategies
December 31 is a deadline familiar to most givers. But this year brings an extra level of urgency due to the looming "Fiscal Cliff" and the changes it may bring this year and next. Taxpayers are likely to face higher tax rates and possibly a change to the charitable deduction.
Will Congress reach an agreement in time? No one knows. But one thing is for sure – change is coming and an uncertain tax environment for 2013 and beyond means that it's wise to take advantage of current tax laws now.
Here are four smart giving strategies to consider now:
1. Give by the end of 2012
Why: If you make a contribution to before year-end, you will receive the tax benefit based on 2012 tax rates and deduction limits.
Consider setting up a Donor Advised Fund. If you contribute to a Donor Advised Fund before year end, you will receive the tax benefit based on 2012 tax rates and deduction limits. Then you can make distributions to your favorite charities in 2013 and beyond.
2. Give more now
What: For the most benefits, take advantage of today's maximum allowable tax deduction for charitable donations, which is up to 50% of your adjusted gross income (AGI) for cash gifts and 30% for non-cash gifts.
Why: There is the possibility that in the future many people will pay taxes on the amount they give to charity. Currently, that is not the case. In other words, the "cost" to give a $1 might be going up.
3. Give Stock gifts in 2012 and other asset-based gifts
What: Give appreciated securities such as stock and mutual fund shares in 2012, and explore gifts of appreciated assets such real estate and business interests.
Why: When you donate appreciated non-cash assets and stock now, you get to deduct the full current value of the asset as a charitable contribution. You don’t have to pay tax on any capital gain, as you would if you sold the asset and then contributed the cash. This is always a smart way to give, but it could be even more advantageous if deductions are capped or limited next year. Again, high-income earners face a potential reduction on itemized deductions in 2013, including charitable contributions, which could make donating now more favorable.
4. Consider a charitable trust
What: Create a charitable trust, and name your Donor Advised Fund or a charity as beneficiary.
Why: Estate taxes are scheduled to return to pre-2001 levels by year-end if Congress doesn't step in to change them. That means all estates worth more than $1 million would be subject to taxes, at a maximum rate of 55%. Instead of losing your estate to taxes, consider giving more of it away to the causes you care about. You can create a Charitable Remainder Trust (CRT) or a Charitable Lead Trust (CLT) during your lifetime or through your will. There are no limitations on the total amount you can donate through your estate directly to charity, and the assets you transfer to charity are safe from being taxed. And when you name your Giving Fund as the beneficiary of your trust, it makes it easy for you and your heirs to change the charities you support from year to year without requiring an attorney, and vary the amounts you give each year.
These are just a few of the main strategies to consider in the current tax environment.
Compiled with data from ECFA and National Christian Foundation.
For information on FCA Giving in FCA Soccer call 901.596.7804 or click on the DONATE on our website
Donations can be mailed to: FCA - 10177 Mackwood Drive Lakeland, TN 38002