Springfield Business Journal_2019-08-23

SPRINGFIELD BUSINESS JOURNAL | ADVERTISING SUPPLEMENT G I V I N G A DV I S E R S K P M C PA S & A D V I S O R S A D D R E S S 1 4 45 E Re p u b l i c Rd S p r i n g f i e l d , M O 65 8 0 4 P H O N E 41 7. 8 82 . 43 0 0 W E B S I T E k p m c p a .co m TAX-SMART STRATEGIES FOR CHARITABLE DONATIONS by Gretchen Russell, CPA During the 2018 filing season, many people learned that they are no longer itemizing deductions. The Tax Cuts and Jobs Act placed limits on some deductions and increased the standard deduction significantly, so many taxpayers are taking the standard deduction and no longer have a direct tax benefit from char- itable giving. However, there are several strategies to fulfill philanthropic intentions while increasing tax benefits. Bunching One tax-smart strategy to overcome this issue is ‘bunching.’ This is where the donor contributes mul- tiple years’ donations in a single year to surpass the itemized threshold and receive a greater deduction. Then, in off years, the donor limits donations and takes the standard deduction. Appreciated Securities Another strategy is donating appreciated securities. With the continued strong economic climate, many stocks or stock funds that have gained value would be ideal for contributing to your favorite cause. When you donate appreciated securities held for more than a year, you will receive a deduction for the current value of those securities and avoid paying tax on the unrealized gains. Donor-Advised Funds Using donor-advised funds also can be a smart and tax-efficient charitable giving strategy since the dona- tion is an immediate tax deduction. The donor can use a donor-advised fund in the bunching year and then direct their charitable giving from these funds throughout the off-years, maintaining their steady stream of charitable giving. Donor advised funds make it easier to contribute appreciated securities for the same tax benefit. Many financial firms and community foundations offer donor-advised funds, including Community Foundation of the Ozarks. Qualified Charitable Deductions Yet another tax-savvy strategy is available for Indi- vidual Retirement Account (IRA) owners over age 70. Instead of writing checks or donating appre- ciated assets, they can make qualified charitable distributions (QCDs) from their IRAs, up to $100,000 per donor per year. The charitable distribution must be sent directly from the IRA to recognized charities and does count toward the required minimum distri- bution (RMD). Among the beneficiaries from QCDs are the many taxpayers who do not itemize deductions. For IRA owners who find themselves in this position, since the QCD is not included in the IRA owner’s income, taxable income is effectively reduced by the charita- ble gift and the more beneficial increased standard deduction is used. While the QCD is not a deduct- ible charitable contribution for people who itemize deductions, there may be tax advantages from using QCDs because making RMDs to charity, rather than to IRA owners, will reduce adjusted gross income (AGI). A lower AGI, in turn, may deliver benefits else- where on the IRA owner’s tax return. Note that using QCDs may not be a straightforward exercise. IRA custodians differ in the way they handle the procedure. The process can be time consum- ing, so it is best not to wait until the waning days of December to get started. Questions? Contact KPM to help determine which strategy might be a good fit for you. 8 2019 GIVING GUIDE