As the end of the year approaches, here are some giving strategies you might be able to use to trim your tax obligation.
According to the most recent report by Giving USA, Americans gave $499 billion to charity in 2022[1]. Americans usually give to charity for two main reasons: to support a cause or organization they care about or to leave a legacy through their support. There can, however, be an added bonus of trimming your tax obligation through deductible donations. That’s why, as the end of the year approaches and we make our way through the season of giving, we thought it could be a good idea of some strategies you can potentially use to cut your tax bill and use your voice. Here’s a quick review of a few charitable choices.
Direct Gifts
Direct gifts are just that: contributions made directly to charitable organizations. Direct gifts may be deductible from income taxes, depending on your individual situation.
Charitable Gift Annuities
Charitable gift annuities are not related to annuities offered by insurance companies. Under this arrangement, the donor gives money, securities, or real estate, and in return, the charitable organization agrees to pay the donor a fixed income. Upon the death of the donor, the assets pass to the charitable organization. Charitable gift annuities enable donors to receive consistent income and potentially manage their taxes.
Pooled-Income Funds
Pooled-income funds pool contributions from various donors into a fund, which is invested by the charitable organization. Income from the fund is distributed to the donors according to their share of the fund. Pooled-income funds can enable donors to receive income, manage their tax burden, and make a future gift to charity. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about a pooled-income fund can be obtained through your financial professional. Be sure to read it carefully before you invest or send money.
Gifts in Trust
Gifts in trust enable donors to contribute to a charity and leave assets to beneficiaries. Generally, these irrevocable trusts take one of two forms. With a charitable remainder trust, the donor or chosen beneficiaries can receive lifetime income from the assets in the trust, which is then passed to the charity when the donor dies; in the case of a charitable lead trust, the charity receives the income from the assets in the trust, which passes to the donor’s beneficiaries when the donor dies. Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with these rules and regulations.
Donor-Advised Funds
Donor-advised funds are funds administered by a charity to which a donor can make irrevocable contributions. This gift may have tax considerations, which is another benefit. The donor also can recommend that the fund make distributions to qualified charitable organizations. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the donor-advised fund can be obtained from your financial professional. Please read it carefully before you invest or send money.
Some people are comfortable with their current gifting strategies. Others may want a more advanced strategy, however, which can maximize their gift and generate potential tax benefits. A financial professional can help you assess which approach may work best for you.
Remember, the information in this article is not intended as tax or legal advice. And it may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
If you have any questions about your portfolio or how you can give to trim your tax obligation and support a cause you care about, please contact us at 913-491-6226. You can also visit us online and schedule an appointment with Terri Lewis at Prime Capital Investment Advisors.
Sources:
- GivingUSA.org
This article is not to be construed as financial advice. It is provided for informational purposes only and it should not be relied upon. It is recommended that you check with your financial advisor, tax professional and legal professionals when making any investment or any change to your retirement plan. Your investments, insurance and savings vehicles should match your risk tolerance and be suitable as well as what’s best for your personal financial situation.
Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite 150, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”).
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