Our office is feeling thankful, and we hope you are too! Now is a good time to think about charities. Here are a few ideas.
First, consider gifting out of your retirement account (IRA).* For example, instead of receiving a required minimum distribution and writing a check, ask your wealth manager how to donate to your charity out of your IRA. The big advantage is that your charity receives more money—perhaps 50% (or more)! All of the money that comes out of your IRA goes to the charity. If you pulled the funds out of the IRA, and paid taxes on the distribution, then you’d have a much smaller donation for your charity.
One downside of gifting from your retirement account is that you don’t get to deduct that donation—because you used never-taxed dollars. Again, the charity likely receives a lot more money if they get it pre-tax than you would be able to afford post-tax. Think about a $10,000 donation at a 37% tax rate: The charity would receive $6,300 if you wrote a check after paying the tax. But you could send your charity the same $10,000 out of the IRA—and the charity receives a 58% larger donation!
Second, consider not gifting this year, but twice next year (as early as January). Because of tax law changes, several of our generous clients are deferring this year’s gifts by one month—until January, 2019. This way, you can use the larger standard deduction in 2018—which may save you taxes. And next year, you can itemize—which may save you taxes next year.
And, for those of you who might want to make a gift your kids while alive, you will be happy to know that the IRS confirmed that you and your spouse can gift more than $22 million before you have a "gift tax." Read more about that here.
*Always consult your own tax accountant, CPA, or the IRS web site, before taking any actions that may result in tax consequences.