Tax benefits from charitable giving

Dec 20, 2021

Income tax benefits:

  • Donors that make charitable contributions to a qualified charity may sometimes be entitled to a tax deduction if they are able to itemize deductions (even if you do not itemize and you make contributions you are entitled to a $300 single or $600 married filing jointly deduction).
  • One underutilized strategy is to make a Qualified Charitable Distribution (QCD) from an IRA’s. A QCD can satisfy all or part of the donor’s Required Minimum Distribution (RMD) and this distribution is excluded from the donor’s taxable income for the year of the gift.  It is a great double whammy.  You get to take the standard deduction and you get to exclude the QCD, so you get the best of both worlds.  There are limits and additional rules so make sure you talk with your tax advisor for the details.
  • Another underutilized strategy is the gift of appreciated assets. Of course, this too has lots of fine print so again; talk with your tax advisor.  This strategy has a double benefit of A) Getting to deduct (if you itemize) the fair market value of the gift and B) You do not have to pay tax on the gain on the gift of the appreciated asset.  This can be done with appreciated Marketable Securities, Real Estate, or Tangible Personal Property (Art, jewelry, books, etc., but this also have strings attached so again, talk with that tax adviser)
  • Some more complex giving strategies
    • Donor-advised funds (DAFs)
    • Charitable gift annuities

Estate Tax benefits

With the current estate rules few people actually pay estate taxes, however if you’re fortunate enough to have a taxable estate, then these strategies can reduce your taxable estate and you can get a current tax deduction.  Again, talk with your tax advisor.

  • Charitable Trusts
    • Charitable Remainder Trusts (CRTs)
    • Charitable Lead Trusts (CLTs)
  • Foundations

This article is for informational purposes only and is not intended as legal, tax or investment advice.

Todd O’Donnell
O’Donnell & Dennis, CPA’s, LLC
1325 Dry Creek Drive, Suite 202
Longmont, CO 80503
Phone 303-776-5908
Fax 303-776-8462