Charitable Giving Tax Planning

Charitable giving tax planning helps you support your favorite philanthropic organizations while reducing your overall tax burden at the same time. Charitable giving earns you kudos for your generosity, but charitable tax planning earns you respect for your financial savvy. To gain appreciation from both your business stakeholders and your community, rely on the professional donor-advised fund tax planning and private foundation tax planning from the tax experts at Miller & Company, LLP. They offer effective strategies that fit your situation. Call today for all your accounting needs, including support for your charitable giving goals.

What Is Charitable Giving Tax Planning?

Charitable tax planning is a process of structuring your philanthropic donations so they align with your tax objectives. When done properly, it provides benefits for all involved. At Miller & Company, LLP, founded by Paul Miller, a talented team of tax CPAs creates a plan for your philanthropic goals, including the appropriate amount and timing, so they fit into a clear, tax-efficient plan.

With the guidance of an experienced CPA and an effective tax strategy for you or your business, you reduce your overall tax liability while maximizing the financial impact of your charitable contributions. When you coordinate your charitable tax planning with a gift and wealth transfer plan and with a wealth preservation plan, you can reduce your taxes while supporting your long-term financial goals, whether for your family or for your business.

What Are the Most Efficient Charitable Giving Tax Strategies?

Donor-advised fund tax planning, charitable remainder trust tax planning and private foundation tax planning are some of the most tax-efficient charitable giving strategies. They can instruct you when and how much to give for the greatest tax advantage. The most efficient charitable giving tax planning strategies for you may include:

• Donating long-term appreciated assets. If you hold appreciated investments — such as stocks, mutual funds or real estate held for more than a year — donating the asset directly to a qualified organization may be more tax efficient than making a cash donation. By donating the assets directly, you avoid paying capital gains tax on the appreciation. At the same time, you can claim a charitable income tax deduction for the assets’ fair market value, subject to IRS rules.
• Using retirement accounts. A Qualified Charitable Contribution (QCD) allows individuals over the age of 70 to transfer funds from their IRA to a qualified charity up to $111,000 per year. With this smart charitable tax planning strategy, you don’t pay any taxes on your required distribution.
• Taking advantage of your donor-advised funds. A donor-advised fund is a charitable giving account that’s like a charitable investment account with the purpose of supporting charitable organizations. A donor-advised fund tax planning strategy allows you to make a tax-deductible contribution of cash or assets and recommend grants to IRS-qualified charities. It’s ideal for individuals with unusually high income years or significant liquidity events because it lowers your overall tax liability.
• Doing charitable remainder trust tax planning. If you have highly appreciated assets and want to generate income while still supporting charitable donations, charitable remainder trust tax planning allows you to transfer eligible assets to your trust, so you receive an income for a set period and donate the remainder of the assets to charity.
• Giving with charitable lead trust tax planning. Charitable lead trust tax planning is a powerful tax-giving planning tool that allows you to transfer assets to a charity for a given period, after which the remaining assets are transferred to your beneficiaries.

Paul Miller, CPA adds: “Our financial advisors identify which of your assets are most efficient to donate. In many cases, highly appreciated securities, IRAs or long-held real estate may provide some of the greatest tax advantages when donated as a part of a comprehensive charitable tax planning strategy.”

Frequently Asked Questions (FAQs) about Charitable Giving Tax Planning

Do I get a tax deduction if I donate to charity?

Yes, you may get a tax deduction when donating to charity. When you make a charitable contribution, you also eliminate its value from your taxable income. It’s a win-win-win event.

What may qualify as a charitable donation?

When you make a qualified charitable donation, it’s tax deductible. The organization to which you donate must have received 501(c)(3) tax-exempt status from the IRS. These organizations are typically religious organizations, educational institutions, private foundations and public charities, to name just a few.

Why should I work with a CPA for charitable giving tax planning?

A CPA helps you avoid capital gains, maximizes your tax deductions and ensures strict compliance with IRS regulations to reduce your risk of being audited. When you receive charitable tax planning from an experienced CPA, you learn about substitution requirements and contribution limitations based on your adjusted gross income. A talented CPA at Miller & Company coordinates your charitable giving with a broader tax strategy, including trust and estate planning and business tax strategies.

Is donating cash better than donating appreciated stock?

Donating cash isn’t always the better alternative. Donating appreciated stock is often more tax efficient. By contributing directly to eligible investments, you avoid paying capital gains tax on the appreciation while claiming a charitable deduction for the fair market value of the asset, subject to IRS limitations.

Are there limits on deductions?

Yes, there’s a certain limit on deductions imposed by the IRS. While it depends on the organization and donation type, most cash contribution deductibles are limited to 60 percent of adjusted gross income (AGI). Other donations of appreciated capital assets are capped at 30 percent of AGI. Contributions to private non-operating organizations are limited to 30 percent AGI for cash.

Why Should I Work with Miller & Company for Charitable Giving Tax Planning?

Miller & Company offers valuable resources for all kinds of donors. Your expert tax CPA develops a flexible charitable giving plan that fits with you and your company’s financial goals. And just as importantly, a top-rated CPA keeps you informed about all upcoming tax changes, which can change regularly, especially when it comes to charitable gifts and tax deductions.

“Charitable giving is most effective when you’re able to do it in combination with a broader tax system and wealth strategy,” says Miller. “The right charitable giving tax plan helps you support the causes you care about, while reducing your income, capital gains and estate tax exposure.”

With New York City offices in Midtown Manhattan, Queens and Long Island, as well as East Coast offices in Washington, DC and Saratoga and Fort Myers, Florida, Miller & Company, LLP offers CPAs who provide tax planning solutions based on your needs. They seek to maximize both your charitable impact and your tax savings. Should you need advice on charitable giving tax planning, contact the office nearest you today to schedule a consultation at Miller & Company.

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