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Year-End Tips on Giving

December 20, 2013

Make sure your charitable gifts have an eternal perspective. Think about the long-term effect of your donation.

Enjoy Tax Savings

Charitable gifts donated to No Greater Joy can generate income tax deductions that could help reduce your 2013 tax bill. The amount you save depends on your tax rate and whether you itemize your deductions or not.

Last Minute Gifts. Contributions are deductible in the year made. Donations charged to a credit card before the end of 2013 count for 2013 even if the credit card bill isn't paid until 2014. Also, checks count for 2013 as long as they are postmarked by Tuesday December 31, 2013 and received by NGJ within a reasonable amount of time. Internet contributions can be made right up to 11:59 p.m. central time on December 31, 2013 though our website nogreaterjoy.org.

Deciding What to Give

  • Cash. Charitable gifts are most often made in the form of cash, checks and electronic transfers. When you itemize your tax deductions, gifts may be used to eliminate federal income tax on up to half of your adjusted gross income (AGI). You may also enjoy state income tax savings.
  • Securities. Giving securities (stocks, bonds or mutual funds) that are worth more than your cost basis can bring additional tax savings. Such gifts are generally deductible for income tax purposes at their full current market value if they have been owned for longer than one year. They can be used to offset capital gains tax plus no tax is owed on capital gains that could be due in the event of a sale. In 2013 capital gains rates increased significantly over 2012 especially for high earners.

If you have investments that are now worth less than they cost, consider selling them and using the cash proceeds to make a charitable gift. This creates a loss you may be able to deduct from other taxable income as well as a charitable deduction for the amount of the cash contribution. The combined deductions for the gift and the loss may total more than the current value of the investment.

Whether you make a gift in the form of cash or other property, any unused 2013 deductions may reduce your taxes for up to five future years under current law.

Other Ways to Give

In addition to gifts of cash and securities, there are a number of other options you might wish to consider.

  • Gifts from retirement plans. Retirement plan assets can be a practical source from which to make gifts. Many tax and financial advisors suggest using these funds to make charitable gifts because amounts withdrawn from retirement accounts can be taxable to you and eventually to your heirs if left to them.  Giving in this way may result in little or no tax impact when you report the amount withdrawn along with an offsetting charitable deduction.

If you are over 70-1/2, it may be possible to make tax-free gifts directly from your traditional or Roth IRA.  Such transfers can satisfy minimum required distributions.

  • A gift through your will or living trust. With changes in estate tax laws in recent years, many of us find they will not be able to leave more to loved ones tax free.  This may also make it possible to give more for charitable purposes, both now or through your will or other long-term financial plans.  You can include a charitable gift of a specific amount, a percentage of your estate, a certain property or all or a portion of what remains after first providing for loved ones.
  • Gifts of life insurance. If you own life insurance policies that are no longer needed for their original purpose, the value of such policies may be used to make a gift that can provide welcome income tax savings today and can also result in significant estate tax savings in the future. No Greater Joy may also be named as a Beneficiary for a specific percentage.
  • Gifts that provide income for you or others. There are also a number of ways to give that can provide you with increased income, current and future tax savings and other benefits. Check with us or your financial advisors for options that may be useful for you.

Act Today for Maximum Benefit

As you can see, you can make meaningful and cost-effective charitable gifts by carefully planning their timing and the property used to fund them.

We will be pleased to provide you with more information in helping you to evaluate your gifting plans. You may contact me by email at [email protected] or by phone at 931-593-2484.

Sincerely in Christ,

Mel Cohen, CFP, RFC, RTRP
General Manager, No Greater Joy
931-593-2484