Consider the following five tax-smart options to help you give as God is leading you and to honor your giving commitments without depleting your cash:
1. Give appreciated assets
By gifting real estate holdings, business interests, or other appreciated assets directly to a Giving Fund at NCF, you’ll most likely be able to receive a fair market value deduction and avoid the capital gains tax, while the charity, as an owner, may enjoy significantly lower taxes of future company profits or sale proceeds. Essentially, you are giving pre-tax value and still getting the charitable deduction – a double benefit – which is a much wiser way to give than cash.
2. Give appreciated securities
By carrying out your regular giving using appreciated assets, you increase your giving capacity by trading current or future tax exposure for more charity today. Instead of writing checks to charity, give appreciated securities to charity and send the cash to your investment portfolio instead. Then you can use the cash you would have given to the charity to replenish your investment account and rebalance your portfolio.
3. Give from deferred-income accounts
If you have deferred income such as retirement accounts, restricted stock units (RSUs), non-qualified stock options, or commercial annuities, these might be smart assets for giving instead of cash. With the 100% AGI deduction this year, you may be able to accelerate your receipt of this deferred income and offset the resulting taxes with a charitable gift of proceeds. However, one important thing to note before accelerating your receipt of these deferred-income assets is to first consult your financial advisors to be sure you will still have more than you need to cover your current and future personal financial needs.
4. Give from an annuity
A non-qualified annuity isn’t a retirement account, but it works in a similar way. If you have excess in an annuity, you may choose to cash it out, pay tax on the income, and then make a gift in the amount you withdrew. The gift may offset the tax. Always consult with your tax advisors regarding your specific situation.
5. Give life insurance
Some givers have life insurance policies with significant cash value that they will not need for their personal financial goals. After consulting with their financial advisors, those givers could withdraw from the policy’s cash value and give to charity up to 100 percent of AGI this year. You can provide the charities of your choice with a significant sum of money and create a lasting legacy.
We hope these tax-smart strategies will help you choose what to give, so that it frees you up to experience the joy that giving can bring and to participate with the charities you care about on a deeper level.
We pray that God will bless you abundantly, so that you’ll have everything you need to accomplish every good work you hope to do and that your giving will result in an overflowing of praise to the Lord.