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Year-End Charitable Giving Strategies

Jimmy Zimmerman
Year-End 2018

Whether you want to support the relief and recovery efforts for the victims of the recent hurricanes, support your favorite qualified charity or make your annual gift to your church, there are three lesser-known charitable giving strategies that could serve to reduce your tax liability. 

1.  Gifting Appreciated Securities

Compared with donating cash, or selling your appreciated securities and contributing the after-tax proceeds, donating appreciated securities is a very tax-efficient means of gifting. You avoid paying capital gains tax on the profit of those securities and you can take a tax deduction for the full fair market value of your donation (subject to limitations).

Because year-end is a high volume processing time for custodians, they impose a deadline for all gifts of appreciated securities. To ensure that there’s adequate time to process your 2018 charitable gifts, please contact us, if you are a client of Beaird Harris Wealth Management, with all gifting requests no later than Monday, November 26th.

2.  Charitable IRA Distributions

Qualified Charitable Distributions (QCDs) are distributions made from an Individual Retirement Account (IRA) directly to a qualified charity. Only individuals age 70½ and older are allowed to make QCDs as they count towards the taxpayer’s Required Minimum Distribution (RMD). The maximum QCD amount is $100,000 per year. 

When processing a QCD, the corresponding 1099 from your custodian will NOT list the distribution as a charitable contribution, thus it is incumbent upon you to notify your CPA that the distribution was a QCD. Note, QCDs cannot be made to a Donor-Advised Fund. 

3.  Donor-Advised Fund

A Donor-Advised Fund (DAF) is a charitable giving account that is set up with your custodian to manage your charitable donations. You receive an immediate tax deduction when making a charitable donation to the DAF and you direct the custodian when to disburse funds (grants) to the qualified charities of your choice. 

This strategy works well when an individual has appreciated securities (stocks or mutual funds) that he or she has owned for at least a year and would now like to donate. Once donated to the DAF, the assets can remain there until you provide further instructions on when the funds are to be disbursed to your charity of choice. This is a particularly useful when an individual has higher-than-usual income, such as from the sale of a business or a large bonus. The individual can front-load several years’ worth of charitable gifting in one year (DAF gift) to receive a larger tax deduction that particular year. Then, the individual can direct smaller amounts be made from the DAF (grants) to qualified charities over the ensuing years.  

Ask Your Wealth Manager or CPA if you are looking for ways to make a difference and minimize your tax obligation before the end of the year.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Beaird Harris Wealth Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Beaird Harris Wealth Management, Inc.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Beaird Harris Wealth Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Beaird Harris Wealth Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

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