Possibilities for Leveraged Giving

Qualified Charitable Distributions (QCD)

Since the increase in the federal standard deduction individuals with IRAs who have a Required Minimum Distribution (RMD) each year are able to contribute directly from their custodian to charity. This works well if taxpayers do not need the cash flow from the distribution but are only taking it because required after 73. The QCD has the effect of lowering taxable income so you get the full tax benefit even if you do not have enough total deductions to itemize. It also deeps total income lower from which other tax calculations and limitations are based, i.e taxation of Social Security.

A strategy of donating appreciated securities can ramp up the tax benefit 2 ways depending on the donor’s tax situation. If the securities have a holding period greater than 1 year the deduction is fair market value. Capital gains are avoided and if the donor is able t itemize above the standard deduction an additional benefit is achieved. Stock in shares from Anthem, Inc & Metlife acquired through policy holding are good candidates because basis may be 0 for capital gains.

With a larger standard deduction it may be more difficult to gain any real tax benefit from charitable contributions depending on other itemized deductions. Some taxpayer/donors are going back to an old strategy of doubling or bunching deductions in every other year. This may give tax benefit in every other year while taking the standard deduction in the off year. Bunching creates a bit of a budgetary issue for the charity because they are getting inconsistent amounts from year to year. This can be avoided by creating a “donor advised fund” to load deductible contributions into an account in one tax year but advise the distributions from that fund to the charity in the off year. There are account minimums and fees to consider and may not work for smaller funds.

These giving strategies will not work for everyone but it is good to know they exist in case an opportunity arises and you may see these described in a tax planning article.