Giving Feels Good...For Several Reasons

Giving

Giving Feels Good...For Several Reasons

Charitable giving can reduce your tax burden and also provide a sense of satisfaction by benefiting your favorite causes.

November 4, 2014

It feels good to give gifts, and to receive them. You may have one or more specific causes that tug at your heart strings, or just know that you want to give back to help others less fortunate. When you gift contributions to qualified charities, you may achieve a double benefit by receiving a tax deduction. Charitable giving can reduce your tax burden and also provide a sense of satisfaction by benefiting your favorite causes.

In light of recent legislation, it’s a good idea to consider your philanthropic objectives. In 2014, the lifetime exemp-tion for single filers was raised to $5.34 million, and you may gift up to $14,000 a year to as many recipients as you like without triggering the lifetime gift exclusion.

As you give, do so with an eye toward reducing your tax liability. For example, consider whether a trust or a donor-advised fund could help meet your legacy and tax-savings objectives. A donor advised fund allows you to grow assets to make future donations yet claim a current income tax deduction. Transferring or gifting assets to a trust while you’re still living can help ensure your assets go where you want them to, as well as benefit from several additional advantages:

  • Future appreciation of gifted trust assets is removed from your estate
  • Income may be shifted to beneficiaries in a lower income tax bracket
  • Transferred assets may be protected from potential creditors, lawsuits or divorce proceedings

Remember that you may claim a deduction for your charitable gift only in the year it is made. Eligible tax deductions can be significant, as the actual cost of the donation is reduced by your tax savings. This table illustrates how the cost of a $10,000 charitable gift decreases for donors in higher tax brackets.

With charitable giving, we receive the most emotional benefit when we feel that our donations make a difference and get the most financial benefit by aligning our charitable goals with a tax and estate planning strategy. It’s important to work with a financial advisor to ensure that your giving strategies not only meet your philanthropic goals, but maximize your financial situation – integrating both tax and estate plans with investment growth opportunities. 



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