How To Give With Purpose

Giving is a major part of life, and most of us look forward to the opportunity to share a portion of our treasure with loved ones and organizations that reflect our values. While the primary purpose of giving is to enrich the lives of others, there are certain tax advantages we can receive as well. Giving on purpose to maximize tax savings both now and for future generations ensures that there will be more of our hard-earned dollars to share and less of it in the hands of the government bureaucracy.

Here are some important things to keep in mind when it comes to giving and taxes:

Charitable Deductions: Gifts to qualified charitable organizations (such as churches and many non-profit charities) are deductible in most cases up to 50% of your adjusted gross income. For example, if you have an AGI of $100,000, in most cases you may deduct up to $50,000 in charitable cash donations. There are some limited instances when the limits are 20% or 30%. That said- most taxpayers never come close to giving half of their income to charity, so in all likelihood you should be able to deduct every dollar of your cash donations.

Some non-cash charitable donations can help you realize tax savings as well. For example, spring is a great time of year to donate old winter clothes and other unwanted items to charity. You may take a deduction on these items equal to the “fair market value” of the property; just make sure to get a receipt and document everything in case of scrutiny later on.

Another great tax saving strategy is to donate stocks to charitable organizations; particularly those in which you would realize a sizable capital gain if liquidated. When donating stock, you are not only able to deduct the current value of the asset on your income taxes; you are also able to avoid paying capital gains taxes on the sale of said asset.

Gifts to Loved Ones: If you are in a financial position where you need to be concerned with the federal estate tax after you pass on, it might make sense to begin gifting to your heirs ahead of time. Though you receive no immediate tax savings from these gifts, they reduce the value of your estate and thus the amount that would be subject to estate taxes later on. The IRS allows an annual exclusion for each individual you give money or property to. For 2015, the annual gift exclusion is $14,000 for single filers and $28,000 for married couples filing jointly. So for example, if you are married with three heirs, you may give each heir $28,000 tax-free.

Using strategies to maximize your giving and minimize tax liability is the smart way to ensure your dollars are doing the most good for others. For further information on how to be on purpose with your 2015 giving, speak with a local accounting firm.

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