Charitable Giving as Part of Your Tax Planning Strategy

There are many reasons why it can be beneficial to give back to your community and those in need. Even beyond the altruistic, moral nature of the act, however, there are many financial and tax benefits of making charitable donations, as well.

Your ability to donate to charitable organizations depends on your financial circumstances, but the following are a few tips that can help you get the most out of these contributions:

• Donate securities: Simply writing a check might not necessarily be the best way to help a charity. The type of property or asset you donate can have different impacts on your taxes, and there could be limits to the amount of cash you can give while still receiving a tax break. To that end, it might be in your best interest to donate appreciated public securities rather than cash, as it may help you avoid capital gains taxes.
• Donate items: Another option for non-cash donations to charities is to contribute valuable, big-ticket items. For example, you may donate motor vehicles to charities, and Florida in particular is a great place to donate boats and yachts. As long as these donations are made to 501(c)(3) nonprofits for charitable purposes, you are able to write off the full market value of the item as a deduction on your taxes.
• Consider how you’ll give: You may either give a donation in one lump sum or arrange for a more sustainable donation over the course of several years. To accomplish the latter, you might consider establishing a Charitable Lead Trust (CTL), which helps you make large donations to charities while receiving tax breaks and still leaving plenty of assets behind to your loved ones. Charitable Remainder Trusts (CRTs) are another option, as is funding a charitable gift out of your IRA withdrawals.

If you would like to learn more about making charitable donations as part of your estate plan, consult a knowledgeable Florida estate and tax planning attorney with BaumannKangas Estate Law.