Gifting in a Volatile Market
Economic turbulence and high inflation may have you feeling cautious about making donations. The good news is there’s a range of options to ensure that your charitable donations aren’t forced to grind to a halt, and that causes important to you continue to receive support. Explore some of the stats and strategies that can help you continue to make a meaningful impact in spite of market volatility.
Steps to prep for charitable giving
- Make charity a part of your tax and financial planning strategies.
- Find out if the charity or organization is registered.
- Check if the donation will be tax-deductible.
- Weigh your giving options, from trusts to donor advised funds.
- Keep a record of your donations.
- Reach out to us to help explore the best options for you.
Deductions
The amount of charitable cash contributions that can be deducted as itemized deductions is limited to, in most cases, 60% of the taxpayer’s adjusted gross income (AGI).
Due to inflation, the standard deduction for 2023 has increased.
- Married and filing jointly $27, 700 (↑ $1,800 from 2022)
- Single or married and filing individually $13,850 (↑ @900 from 2022)
- Head of household $20,800 (↑ $1,400 from 2022)
Annual exclusion and lifetime gifts
Using marketable securities, when volatility is high and valuations are down, can provide for extra tax advantages on charitable gifts. In theory, you could give up to $17,000 as many times as you want in 2023 without having to worry about paying federal gift tax.
Pro Tip: Making larger gifts with low-value securities allows a taxpayer to remove assets from the taxable estate while retaining more of the tax exemptions (currently $12.92 million) for estate tax, gift tax and generation skipping transfer.
Charitable remainder trusts (CRT)
The What: A CRT is a trust that allows you to donate cash, property or assets to charity and draw annual income for life or for a specified period.
The Why: Funding a charitable remainder trust with highly appreciated stock can solve capital gains tax problems, allow tax-efficient investment diversification, and provide a predictable income and plan for charitable giving.
The How: Because a CRT is an irrevocable trust, the assets that go into it cannot be taken back out. The CRT can sell appreciated assets over time – allowing you, as the donor, to avoid capital gains tax and pay income to one beneficiary.
Please be aware that there may be substantial fees, charges and costs associated with establishing a charitable remainder trust.
Private Wealth Strategies
Make larger donations in cash: Providing the recipient is a 503(c)(3) charitable organization, eligible cash donations are tax deductible – just remember to keep your donation receipts!
Gift through a donor advised fund (DAF): With funds already earmarked for giving, DAFs enable you to donate long-term appreciated assets, minimize capital gains and maximize the 30% AGI limits for appreciated securities.
Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a donor advised fund for federal and state tax purposes.
Combine Strategies: Mixing and matching giving strategies can help you take advantage of the increased AGI percentage for gifts and benefit from tax savings on long-term appreciated assets.
With preparation and planning you can continue to make a long-term, meaningful impact on the causes that matter most to you. Reach out to us to learn more about charitable opportunities during times of volatility.