Giving to charity not only benefits the charities but can also benefit the donor because of valuable tax incentives. To fully maximize the tax deductions, you – or your tax planning attorney – must understand the intricacies and strategies of charitable giving and tax law and how they apply to your unique financial situation. The tax attorneys at France Law Firm have the experience to help you maximize your tax deductions via charitable giving.
The Tax Benefits of Charitable Giving
When you donate to qualified charitable organizations, you can reduce your overall tax liability. This type of deduction is valuable to those earning a high income, helping them minimize their tax burden while supporting worthy causes at the same time.
To maximize tax deductions, you should consider several factors, including:
- Choose the Right Charitable Vehicle: Common options for charitable giving include charitable remainder trusts, donor-advised funds, cash donations, and private foundations. Each type has its benefits, including control over funds and tax efficiency. Your estate planning attorney and tax attorneys can help you choose the best charitable vehicle for your situation.
- Leverage Appreciated Assets: By donating appreciated assets, such as artwork or real estate, you can support your favorite charity and maximize your tax deductions. In many cases, if you held the asset for over a year, you can deduct the asset’s fair market value when you donate. In addition to minimizing your tax burden, you could avoid paying capital gains tax. Other assets may include restricted stock, publicly traded securities, private equity fund interests, post-IPO stock, cryptocurrency, equity compensation awards, and privately held business interests.
- Qualified Charitable Distributions: If you are 70.5 years or older and required to take minimum distributions from your retirement accounts, you can transfer funds from your IRA to a charity without realizing taxable income from the distribution.
- Use Bunching Strategies and Optimize Timing: If you can bunch more than a year’s worth of charitable deductions and optimize the timing, for example, by coordinating charitable donations with significant financial events, you could increase your tax savings. Bunching may benefit those who can now take the much higher standard deduction. For example, if you donate for two years in one year, you can itemize in 2023 and then take the standard deduction in 2024.
Charitable Giving and Estate Planning
Charitable giving can also affect the amount of taxes your estate pays. Strategic charitable giving can maximize wealth transfer to your heirs by using various vehicles. Your tax attorneys and estate planning attorneys at France Law Firm can help you structure your charitable giving to minimize not only your yearly tax obligation but also your estate tax obligation.
Obligations for Charitable Giving: Documentation and Record-Keeping
To take advantage of charitable giving, you must document your donations and keep the documentation to prove your donations to the Internal Revenue Service. When you submit your receipts to your tax attorney at France Law Firm, your attorney can include the donations as long as they are to qualified charitable organizations.
Documents may include receipts, appraisals for non-cash assets you donated, and letters of acknowledgment from charitable organizations. Your attorney can use this documentation to file the required tax forms to receive a tax deduction without incurring potential penalties if you exceed certain thresholds.
Contact France Law Firm
Charitable giving and tax planning are complex aspects of your finances. A tax attorney can help you claim charitable giving on your taxes and estate to maximize tax deductions. Your tax and estate planning attorney can help you choose the right philanthropic vehicle and leverage appreciated assets to maximize your tax deductions.
Contact a tax and estate planning attorney at France Law Firm for a consultation by calling 850-224-1040.
