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’Tis the season for gifting

Most of us receive many gifts during the holidays, and when a beautiful gift arrives that was carefully selected just for you, it warms your heart. That’s how I felt when I received a gift acknowledgement from ElderHelp of San Diego last week. ElderHelp is a non-profit organization dedicated to helping seniors stay in their homes, and the note said that a donation was given in our name from Cindi Hill of Hill Compliance Advisors, our compliance consultant. As someone who spends a large portion of my time seeking out innovative solutions to help my clients retire on their own terms, this was a particularly thoughtful gift.

If you’re still looking for the perfect gift for someone who doesn’t need any more “stuff” (or, like me, is on a diet and certainly doesn’t want any food STUFF!), giving to their favorite charity may be just what you’re looking for. Of course, gifting can take many forms, and many are also tax deductible, which can give the ability to be even more generous than you might think.

Facebook CEO Mark Zuckerberg clearly understands the value of a tax-deductible charitable donation. If you’ve been paying attention to the news at all, you’ve surely heard his announcement that he and his wife Priscilla Chan made a promise to their newborn daughter to give away 99% of their Facebook wealth “to advance human potential and promote equality.” And while some have criticized the Chan Zuckerberg Initiative for its tax-deductible status, what many fail to realize is that the tax benefits won’t simply put more money back in Zuckerberg’s pocket. Zuckerberg and his wife have been very careful about how they are donating assets, creating an LLC to maintain a great deal of control over how the gifted assets are used. Theirs is a great example of a well designed charitable giving strategy that truly becomes “the gift that keeps on giving.”

Sure, most of us (I can safely say none of us!) don’t have that level of expendable assets to gift, but there are many ways to support your favorite charities this holiday season while also achieving year-end tax benefits. I know my own inbox is overflowing with year-end appeals from charities I know and love, as well as many that are new to me. Whatever you choose, keep good records and remember that all donations must be made by December 31 to be eligible for 2015 tax credits. Following Mark Zuckerberg’s lead, it’s a great time to take control of your money by directing it to the charities that mean the most to you instead of giving it to Uncle Sam.

Clearly there’s not much time to plan, but here are a few options to consider:

  • Set up a Donor-Advised Fund. These philanthropic funds give you a current-year tax deduction while making thoughtful, intentional gifts in subsequent years. Since many smaller nonprofits aren’t set up to receive gifts of stock or other complex holdings, this is a great option if you’re donating non-cash assets. Plus, by giving to a donor-advised fund, you avoid capital gains tax. Your contribution is treated as a gift to a 501(c)(3) public charity, and you are allowed to deduct up to 50% of your adjusted gross income for cash gifts, and 30% for appreciated securities. If you’re interested in this option, we can help, but call us immediately to be sure we can get everything in place by year-end.

  • Look for charities on www.charitynavigator.org. If you’re not sure where to give—or are worried about your money going to a less-than-reputable organization—the site rate’s charities by financial health, accountability, and transparency, and you can easily browse charities by categories such as human services, environment, education, animals, arts & culture, public policy, and more. All charities listed qualify for 501(c)(3) tax-exempt status. If you do choose to give, be sure to tell you advisor and your CPA to ensure proper tax crediting.

  • Donate from your IRA using a Qualified Charitable Distribution (QCD). If your IRA is overfunded, not only are you in an enviable position, but year-end legislation finally made QCDs from IRAs permanent (in the past, the rules came and went, making it a gamble to take this approach in hopes of a tax benefit). Donations are limited to $100,000 of tax-deferred IRA savings annually, and offer a significant advantage over taking a taxable IRA distribution and then contributing the proceeds to charity, as QCDs are not included in adjusted gross income.

  • Donate household items. If my last blog inspired you to declutter, Boxing Day (the day after Christmas) is a great time to box up items and send them off to new homes via GoodwillThe Salvation Army, the Vietnam Veterans of America (who will usually pick up items at your door within 24 hours). Clearing out your pantry and making a donation to your local food bank is another great option (we give to Second Harvest). Whatever charity you choose, be sure to save your receipts for tax time.

Of course, if you’re just looking to give and tax benefits aren’t a priority, there are always great causes to be found on GoFundMe—helping families in need due to death, injury, or other personal tragedies; supporting individual volunteers, natural disaster recovery, and more. All told, Americans make 30% of our annual donations in December. I hope you’ll take part in the “season for gifting,” however you choose to give.

Need help setting up a donor-advised fund, QCD, or other vehicle for charitable donations? Please contact us right away to be sure we can meet the December 31 deadline. As always, I’m here to help.