Save taxes and help The Salvation Army OC
It’s time to do some tax planning for your 2024 taxes. Here are some easy, efficient ways to cut your federal and California taxes and benefit the charity your choice – The Salvation Army Orange County.
Charitable contributions are a great way to reduce taxable income, but consider these variations on plain vanilla cash gifts to reduce your taxes.
A few key things to remember:
- If you don’t itemize your deductions, your charitable contributions do not give you a tax benefit.
- If you are 72 or over, you must take a required minimum distribution (RMD) from your own IRA on or before December 31 of each year.
- What follows if a very basic explanation of complex tax laws. So you must consult your tax advisor before implementing these strategies.
Qualified charitable distributions (QCD)
Using required minimum distributions (RMDs) to make charitable contributions remains one of the easiest and best strategies for retirees. These distributions are known as QCDs or the IRA-to-charity strategy. Contributions must be made by December 31 to count for 2024. With the QCD, you ask the IRA trustee to send money to the charity, not to you.
With the standard deduction high, many retirees use the standard deduction. Money sent directly to the charity from the IRA is treated as an RMD but is not included in your taxable income. If you are at least 70 ½, you may exclude up to $100,000 in QCDs in 2024 from your income and also take the standard deduction.
Donor Advised Fund (DAF)
Need a big charitable contribution deduction this year but don’t know who to give it to? A donor-advised fund may be your answer. You can deduct many years’ worth of donations into a deduction in one year. Donor-advised funds are easy to establish. Many mutual fund companies offer a donor-advised fund.
You contribute either cash or securities to the fund. The funds are invested, and you do not pay tax on the income and gains in the fund.
Caution: Once money or stock is deposited in the fund, you can’t change your mind and get the money back.
The sponsoring organization receives and retains exclusive ownership and legal control over investment returns and the amounts contributed to the fund, and they also have the ultimate responsibility for making the gift.
The donor receives several tax benefits for the contribution:
- A tax deduction for the amount donated;
- Avoidance of capital gains taxes if the gift is appreciated property; and
- Reduction of the gross estate by the amount of any contributed assets.
The beauty of the donor-advised fund is that you get the full charitable contribution deduction in the year the assets are contributed to the fund, but can spread the charitable gifts over any number of years. This is especially beneficial for people who are retiring and expect their income to decrease.
Appreciated Assets
If you donate appreciated assets that would create long-term capital gain if sold can, you can claim a charitable contribution deduction for the fair market value of the property on the date it is donated and do not have to recognize capital gain.
Complex strategies
For very wealthy individuals, creating charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts can provide a large tax deduction now with the property not transferred until death.
For information on how this works, contact Lauren Steyer, Director of Development at 714-210-6036 or lauren.steyer@usw.salvationarmy.org.