Many people are unaware of the substantial benefits available for financial gifts made at year-end. Among them are
• Potential tax savings from charitable deductions
• Increased income from non-productive or low-producing property
• Avoidance of capital gains tax on highly appreciated property
• Income tax deductions this year for gifts actually made in future years
• Personal satisfaction in knowing that you are involved in a worthwhile mission
Let’s look at some of these advantages.
Increased Tax Savings from a Charitable Deduction: You may need additional deductions this year since many of the standard deductions you have previously taken on your income tax returns are no longer available.
Giving from Cash Flow: You can receive an income tax deduction by giving cash. This is most beneficial to Alabama Baptist Children’s Homes & Family Ministries and many times, it is the easiest way for you to give.
Gifts of Net Worth: Your cash flow may not be sufficient to make the gifts you desire and to receive the tax deductions you need. Many times, you can make a larger gift of property and receive a substantially higher tax deduction because it does not affect current cash flow.
Charitable deduction tax savings are available when you make gifts of property: insurance policies you no longer need, stocks, bonds, mutual funds, real estate, or tangible personal property related to the exempt function of the Children’s Homes. Each of these gifts will provide a tax deduction this year if the gift is completed before Dec. 31.
You also can create an income tax charitable deduction which will provide substantial tax savings by simply guaranteeing today that certain properties will be distributed to charity at your death. This can be accomplished with property such as your home or investment properties from which you wish to maintain income.
Avoidance of Capital Gains Tax: The property you have available for giving may have substantially appreciated in value.If you sold the property, you would pay a tax on the difference between what you paid for the property and what it is worth today. This is called a capital gain and is taxed at both the federal and state level. If you contribute the property rather than selling it, however, you can receive a charitable deduction for the full value of the property and avoid the tax on the gain.
An Income Tax Deduction for Gifts Made in Future Years: If your income tax bracket is higher this year than it will be in future years, or if you need an additional deduction this year, you can establish a specially designed trust. Property is transferred to the trust with income payable to a charitable organization for a period of years. At the end of the trust period, the property will be returned to you.When the trust is properly designed, you can receive an income tax deduction this year for the current value of the future income gifts to charity.
Charitable Gift Annuities: Many people have fixed-income investments producing income at lower than current market rates. Others have property which is paying little or no return. High appreciation, however, keeps them from selling the assets and investing to achieve a higher return.Charitable gift annuities have maintained a high rate of return. Many individuals find this a more attractive investment.Or property can be placed in a specially designed charitable trust, providing a substantial income tax charitable deduction. The property can then be sold by the trust, avoiding tax on the capital gain, and the trustee can invest in high income producing assets, resulting in a considerably higher income.The assets are invested to provide income for you and are not actually transferred to the charitable organization until the end of the trust period.
Personal Satisfaction: There is an additional advantage available with each of the above giving options: knowing that you are receiving substantial personal benefit as you are helping children and youth in need through Alabama Baptist Children’s Homes & Family Ministries. This is a winning combination: doing good for others while helping yourself.
To help:
Bob Dewhurst, director of development with Alabama Baptist Children’s Homes & Family Ministries, is available to help you with your year-end planning. A special report titled How to Maximize Your Year-End Giving provides more detailed information on each of the planning concepts discussed in this article. Use the form below to ask for your free copy of the report and to request personal assistance at your earliest convenience.
Email today dewhurst@abchome.org or contact Bob Dewhurst by phone toll free 888.720.8805.
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