The new tax law is predicted to reduce significantly the number of taxpayers who itemize deductions.  That has some concerned about charitable giving. There are ways for taxpayers who do not itemize deductions to give to charity and still receive some tax benefits.

Give from your IRA. Those aged 70-1/2 or older, who must take required minimum distributions from retirement accounts, can give up to $100,000 annually from those accounts to charity. The money going to charity is not included in income at all and does not affect the size of the standard deduction. That makes it a true win-win. There are a couple of restrictions: the money must go to an operating charity—no gifts to community foundations or charitable giving accounts.  Also, the gift must go directly from the retirement account to the charity—it cannot pass through the taxpayer’s hands.

Bunch Gifts. By making charitable gifts for several years at once, a taxpayer may be able to generate enough deductions to exceed the standard deduction and itemize. This is most efficiently done with a charitable giving account.  You get the deduction when you fund the account but can have gifts go out to charity over time. Better yet, use appreciated stock to fund the giving account—that way you can deduct the fair market value of the stock without ever having to pay tax on the appreciation. Every major brokerage firm offers charitable giving accounts; so do many community foundations.

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Even if you choose not to bunch gifts, it’s always best to give charities appreciated assets that you’ve held for more than a year. Whether or not you itemize your deductions, you escape tax on the appreciation.  

Leave your IRA to Charity.  Very few of us will ever have to worry about estate tax. The new tax law continues to allow a basis step up at death—when you pass away, assets in non-retirement accounts get a new, fair market value cost basis. That allows your heirs to sell them at little or no tax cost. That basis step up rule does not apply to assets in retirement accounts. Distributions from non-Roth retirement accounts to your heirs, like distributions to you, will be totally taxable as ordinary income. (If you made non-deductible contributions, a little may come out tax free.)  Leave those retirement accounts to charity—charities don’t pay income tax.  Your heirs would prefer the taxable assets, which come without a tax bill attached.

Please contact Claire Toth at 908-598-1717 or ctoth@ptview.com if you have any questions or to discuss how this might impact your financial situation.

Note:  Claire E. Toth, JD, MLT, CFP™, is Vice President at Point View Wealth Management, Inc., a registered investment advisor at 382 Springfield Ave., Summit. Visit us at  www.ptview.com.

For 25 years, Point View Wealth Management, Inc. has been working with families in Summit and beyond, providing customized portfolio management services and comprehensive financial planning, to develop and achieve their financial goals.  Click here to contact  David DietzeJohn PetridesClaire TothDonna St.Amant, and Elaine Phipps, or call 908-598-1717 to learn more about Point View Wealth Management, Inc. and how we can help you and your family meet your financial objectives. To sign up for our complementary commentaries and newsletters, e-mail us at firm@ptview.com.