Let’s Discuss Charitable Giving
Giving to charity is not only personally satisfying, but also IRS (and possibly your state) rewards you with generous tax breaks.
1. Current income tax deduction if you itemize, subject to certain percentage limitations for any one year. 2. Tax benefit received reduces the cost of the donation (e.g., a $100 donation from someone in a 30 percent tax bracket has a net cost of $70). 3. Reduces or eliminates capital gains tax if appreciated property is given. 4. No transfer (gift and estate) taxes imposed. 5.Removes any future appreciation of the donated property from your taxable estate
Charitable Giving – Will
If you don’t make a will, your state will decide where your money goes.
The easiest and most direct way to make a charitable gift is by an outright bequest of cash in your will. This requires only a short paragraph in your will that names the charitable beneficiary and states the amount of your gift.
Charitable Giving – Estate
When developing your estate plan, you can do well by doing good. Leaving money to charity rewards you in many ways. It gives you a sense of personal satisfaction, and it can save you money in estate taxes. By leaving money to a charity when you die, the full amount of your charitable gift may be deducted from the value of your taxable estate.
Charitable Giving – Other
You can also give in a retirement plan or insurance policy. If you have funds in an IRA or employer-sponsored retirement plan, you can name your favorite charity as a beneficiary. Naming a charity as beneficiary can provide double tax savings. First, the charitable gift will be deductible for estate tax purposes. Second, the charity will not have to pay any income tax on the funds it receives. This double benefit can save combined taxes that otherwise could eat up a substantial portion of your retirement account. You can also name a charity as beneficiary on your insurance policy. A charity gift will keep on giving after you are gone!