Money is a tool, and usually we look at how it can be used to our benefit. But that tool can be used to benefit others through gifting and charitable giving. If you have a desire to share your financial success, incorporate those thoughts into your financial plans.
After you determine who gets your money, you need to decide when the giving will occur. If the gifts are to individuals, as of 2016 donors can give $14,000 to each person and the gifts do not need to be reported on tax forms or subjected to gift taxes.
If you are married, both you and your spouse each can give up to $14,000 without triggering tax on the gift. For example, together, couples can give $28,000 to an individual. Gifts above that amount are not subject to gift taxes until the couple’s accumulated lifetime gifts to all exceeds $10.68 million. However, they must be reported on the giver’s tax returns by filling out Form 709. Those gifts can be specified to be used now or for a long-term benefit such as funding a 529 College Savings Plan, a Roth IRA or a saving and investment account.
CHARITY GIVING
If the gift is to a charity, it may be tax-deductible. To deduct a charitable contribution, taxpayers must file Good Gifts Charitable Giving and Your Financial Plans By James S. Lineweaver Form 1040 and itemize deductions on Schedule A. Charitable gifts can be made now, or planned for the future. Future gifts can be specified in your will or by naming a charity as a beneficiary on a retirement account or life insurance policy.
Planned gifts are both smart and generous. If you need money for your lifetime expenses, they are available, and the remaining assets benefit your desired charity. If you don’t itemize deductions on your 1040, once you reach age 70 1/2 you can transfer up to $100,000 a year from your IRA directly to charity as a Qualified Charitable Distribution (QCD), without that distribution counting as part of your adjusted gross income. The QCD counts toward the annual Required Minimum Distribution (RMD) that you must take from a traditional IRA starting at the same age.
Even if you do itemize, a QCD might be more tax efficient than taking the IRA distribution as income and then donating it.
It might be smart to consider giving appreciated securities to charity rather than just writing a check. If you donate appreciated securities, as long as they have been held for over a year, you get a deduction for the market value of the securities donated and avoid tax on the capital gains when the security is sold. Have questions on other financial topics you would like to see addressed in future issues? Visit Lineweaver.net to submit your question.
