How to Increase Year-End Giving with Tax-Saving Strategies
Mark Helland

Mark Helland, CPA is a partner with the public accounting firm of Elliott, Dozier and Helland, PC (www.edhcpa.com) which is located in Tulsa, Oklahoma. Mark specializes in audit, outsourced accounting and tax related issues for church and ministry clients across the United States. To obtain additional information on audit, outsourced accounting or tax return services for your organization, Mark can be contacted via email at [email protected] or by phone at (888) 893-1259 or (918) 488-0880.

One thing that every non-profit organization has in common is the need for ongoing donations and the end of the calendar year presents a huge opportunity. Year end is a time for donors to realize that they need to take steps to reduce their taxes and one of the few good ways left in the tax code to do this is via charitable gifting. 

While cash donations are obviously the standard, there are a couple other strategies that deserve some attention. With a little bit of planning and promotion, these ideas could help increase year end giving while helping your donors maximize their financial well being at the same time. Following are the strategies in a “ready made” article that you can distribute to your congregation or donor list:

Sample Article:

It is hard to believe that tax season is almost here again, but believe it or not it is right around the corner…. again. Since the end of the year is almost here, now is a great time to do some tax planning and charitable contributions are always a great way to reduce your tax bill while helping those in need at the same time.

While cash contributions are the most obvious way to create tax saving charitable donation write-offs, there are actually other strategies that can provide even greater tax savings for you.

Idea # 1:  Donate Appreciated Assets to Charity

An effective tax reduction strategy is to give assets that have appreciated in value over the years, such as stocks, exchange traded funds or mutual funds, directly to the charity of your choice. By so doing, you will get a deduction for the fair market value of the asset(s) donated and you will avoid ever having to pay capital gains tax on the appreciated asset(s). For taxpayers in higher income brackets, capital gain rates have increased for 2013 and new taxes related to investment income are now in effect (as a part of health care reform), so this strategy makes sense now more than ever. This strategy works best for assets that you plan to sell anyway and would then have to pay tax on the capital gain. Additionally, the strategy only applies to securities with long-term capital gains. Securities with short-term capital gains would not be eligible to receive a charitable donation for the fair market value at the date of the donation.

“XYZ Ministry” has a brokerage account set up and is able to accept this type of donation and would greatly appreciate your generosity. This strategy could also apply to other assets such as real estate but very specific and detailed rules such as obtaining an appraisal may apply. So, investments assets held in a brokerage account are the most ideal types of assets to employ for this strategy.

Idea # 2:  Donate to Charity from a Traditional IRA* (Taxpayers over age 70 and ½)

Another effective tax reduction strategy is to donate to charity directly from your IRA. The strategy is called the “QCD” rule and at it is extremely important to understand that at this point the strategy was only in effect until the end of 2013 and has not yet been extended for the 2014 tax year. However, there is some indication that congress may extend the strategy for the 2014 tax year. More to come on this, so if you are interested in doing the following strategy, contact your tax advisor for the most recent update.

The QCD rule strategy results in avoiding a required minimum distribution (“RMD”) being distributed to you, being included your income and of course, being taxed. In effect, the strategy also helps to deplete your IRA balance so that future required minimum distribution annual amounts are lower. Here is how it works – beginning at age 70½, you can have all or part of your RMD made directly from your IRA to a qualified charity (up to $100,000 per taxpayer, per year). The charity then receives the RMD instead of you and the qualified distribution will not be treated as taxable income by the IRS, in lieu of receiving credit for a charitable donation. RMD’s are complicated, so definitely consult a tax advisor to make sure the details of the RMD calculation and logistics are all carefully considered.

For Further Information:

If you would like assistance on how to take advantage these opportunities for charitable gifting, please let us know. We would happy to speak with you and we appreciate your generosity! For more information, please contact…

There you go! A ready-made article that you can put in a newsletter, bulletin or any other type of year end communication to donors. Feel free to copy and use this article. One thing to note though, if you do not currently have a brokerage account set up and you want to take donations of securities, you need a brokerage account ASAP. Without a brokerage account set up and ready to go to accept donations of securities, strategy #1 will be a disaster for you! Also, be ready for last minute decisions as many wealthy donors are short on time and decisions to donate securities are frequently made at the eleventh hour. Trust me, I know this from taking last minute calls on an annual basis on December 30th and 31st. Overall, this little bit of extra hassle might result in additional and potentially larger donations for your organization this year.

 

This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is shared with the understanding that neither the author nor Tony Cooke Ministries is engaged in rendering legal, accounting, psychological, medical or other professional services. Laws and regulations are continually changing, and can vary according to location and time. No representation is made that the information herein is applicable for all locations and times. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

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