 The Taxman
Today, millions of Americans have either submitted their tax returns or filed for an extension. While it may be too late to be to change your current tax situation, it’s not too early to be thinking of how you can improve your taxable position next year. Here are a few ideas that may benefit you and ASHRAE at the same time.
An Outright Gift
If you itemize your deductions, a gift of cash can save you up to 35 percent of the amount donated on your income taxes, so your gift costs you less than ASHRAE receives.
Giving stocks, bonds, or mutual fund shares provides you with a charitable income tax deduction equal to the market value of the securities—up to 30 percent of your adjusted gross income—as well as relief from capital gains taxes.
Real Estate
Making a gift of real estate frees you from the capital gains taxes you would owe if you were to sell your real estate. You can also be relieved of the insurance fees and maintenance costs that come with property ownership. Even better, these gifts are appropriate at any point in your life, so that you can invest in the work happening at ASHRAE at any time—there is no need to wait until retirement.
A gift of real estate can be realized in different ways. You can make an outright gift of your property and receive a charitable income tax deduction and avoid all capital gain that would be due if you were to sell the property. Another type of gift allows you and your spouse or another beneficiary of your choice to continue to live in the property for life. You can also convert your real estate into a stream of lifetime income for you or other loved ones.
A Charitable Remainder Trust
You may have an asset—securities, real estate or a sum of cash—you’d like to give to ASHRAE, yet still need the income it provides. Even if it has a low return and you’d prefer to sell it and reinvest in something more productive, you are reluctant to do so because capital gains taxes would take a big bite out of the proceeds.
You should consider donating such an asset to a charitable remainder trust. You avoid any up-front tax on the gain, thereby putting the asset’s full value to work first for you and ultimately for ASHRAE. The remaining balance in the trust at the end of your life will be used by ASHRAE to continue to provide outstanding educational and scholarship opportunities for future generations.
The Charitable IRA Rollover
If you are 70½ or older, you can make tax-free transfers of up to $100,000 to charities. Transfers within the allowable limit from a regular or Roth IRA to one or more charities will not be included in your taxable income, and they will count towards your required minimum distribution.
Aside from its simplicity, a direct transfer from your IRA to a charity can be very beneficial if you do not ordinarily itemize your deductions. It is also beneficial if the ceiling on charitable deductions would prevent you from deducting the entire transfer were you to take a taxable distribution and then contribute it to charity.
You simply instruct the administrator of your IRA to make the transfers to whatever charities you wish, keeping in mind that the total of all transfers combined cannot exceed $100,000. You can make a qualifying transfer to a public charity, such as ASHRAE, but not to a private foundation, a donor advised fund, or a supporting organization. Transfers can be made only from an IRA. If your retirement funds are in an employee-sponsored plan, such as a SEP IRA or 401(k) plan, you must first do a tax-free rollover of funds from that plan to a regular IRA and then a transfer from that IRA to charity.
We would be happy to discuss any of these tax-friendly gifts with you and your financial advisor.
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