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TAX PLANNING USING CHARITABLE GIFTS

Posted by Robert F. Meis | Mar 23, 2016 | 0 Comments

Robert MeisWith the April 15 income tax filing deadline looming, many taxpayers are looking for ways to reduce their income tax liability.  One way to reduce income taxes is to make gifts to charity.

Perhaps the most efficient way to make a charitable gift is to give long-term appreciated assets such as stocks, bonds and/or mutual funds to charity.  There are two primary advantages to giving appreciated assets to charity.  First, the donor may take (subject to certain limitations) a deduction from the donor's taxable income for the full fair market value of the asset at the time of the gift.  The second advantage to giving appreciated assets is that the donor pays no capital gains tax on the appreciation of the asset.

Another tax efficient way to give to charity is to make qualified charitable distributions (QCDs) from individual retirement accounts (IRAs).  In December of 2015, Congress voted to make permanent the law that allows QCDs from IRAs.  QCDs are gifts directly from a person's IRA to eligible charitable organizations.  Remember that the transfer must be made directly from the IRA trustee or custodian to the charity.  QCDs are not allowed from 401(k) plans, Simplified Employee Plans (SEPs) or SIMPLE plans.  QCDs are available for persons age 70 ½ or older and a person can give up to $100,000.00 per year from an IRA to eligible charities.  QCDs count toward a person's required minimum distribution (RMD) for the year and can have numerous income tax and other benefits depending on a person's particular income tax situation.  For example, by making a QCD, a person's adjusted gross income (AGI) is reduced, which impacts many other income tax calculations such as deductions for medical expenses, itemized deductions, and the personal exemption phase out.  In addition, by reducing AGI, a person can potentially reduce Medicare and prescription drug premiums.

If you have any questions about QCDs in particular, or estate and gift planning in general, please contact Robert F. Meis at 712-252-0020 or email Bob at [email protected].

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About the Author

Robert F. Meis

EDUCATION University of Iowa, B.B.A., with honors, Economics and Finance, 1980 University of Iowa College of Law, J.D., with distinction, 1983 ASSOCIATIONS The Iowa State Bar Association Nebraska State Bar Association State Bar of South Dakota Iowa Academy of Trust and Estate Counsel Woodbury Count...

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