The Investment Coach

Charitable giving, love of neighbor, crosses religious, cultural, and humanistic lines. The word “charity” comes from charis, Greek for “grace, kindness, and life.” Scripture instructs, “Give to the Most High as he has given to you, generously, according to your means. For he is a God who always repays and will give back to you sevenfold.” (Sirach 35:12-13)

We give of our time, talent, and treasure because it’s the right thing to do. A tax break is a bonus, but that may require some creativity for 2019 and beyond. The tax act effective Jan. 1, increased standard deductions.

Married couples get $24,440 plus $1,300 for each spouse age 65 or older; up to $27,040 for Mr. and Mrs. Senior Citizen.

Singles can claim $12,200; $13,850 if 65 or older. Head of household, $18,350 plus $1,650 at age 65. Until all itemized deductions exceed the standard deduction, you get no added write-off benefit. Heads of charities worry that may depress giving. It shouldn’t, but it could.

However, there are tax wise strategies. For those 70 ½ or older, the Qualified Charitable Distributions (QCDs) rule may help. Required Minimum Distributions (RMDs) increase taxable income and may increase Medicare Part B monthly premiums two years hence. If you don’t need all of your RMD funds to live on and don’t want to pay taxes on the whole amount, you can request that some or all of your RMDs be sent directly from your custodian to a qualified public charity instead. You have made a donation with untaxed dollars and decreased your taxable income.

A donor 70 ½ or older with a large IRA and funds not needed for living expenses may give up to $100,000 per year directly to a charity.

You have a windfall—sell a closely-held business or other asset such as real estate; win the lottery; a big bonus—and a huge pending tax bill. You have charitable inclinations and would like to spread gifts over coming years when you are likely to be in a lower tax bracket. You can create a donor advised fund (DAF) and take a 100 percent deduction in the year of the donation.

Money in the fund may grow tax free and you can allocate gifts to qualified charities over time. You can donate cash up to 60 percent of adjusted gross income (AGI); up to 30 percent of AGI with a five-year carry forward on non-cash appreciated assets.

There are other tax smart moves, including bunching several years’ worth of gifts into one year, and/or simply making gifts of appreciated securities from non-retirement accounts to avoid capital gains taxes.

If you are considering charitable bequests as part of your estate plan, you might consider a Charitable Remainder Trust that will provide you with payments for life and a charitable deduction that could enable you to itemize above the standard deduction. Sophisticated tax and estate planning strategies should involve holistic analysis in concert with your financial, tax, and legal advisors. Life insurance can be an efficient way to move dollars to charitable and philanthropic causes.

A Charitable Gift Annuity from a charity can offer a secure, fixed lifetime payment for one or two annuitants in exchange for cash or appreciated assets. For example, for a single life gift at age 70, the American Institute for Cancer Research will pay out at a rate of 5.6 percent annually; 7.3 percent at age 80. Two life rates are slightly lower.

In addition to the income stream, annuitants may be eligible to take a tax deduction at the time of the original gift, based on the estimated amount that will eventually go to the charity after all the annuity payments have been made. A portion of the payments received may also be tax-free for a period of time based on the donor’s statistical life expectancy.

For those who can itemize, 14 cents per mile driven in service of charitable organizations may be deducted.

Having said all of this, recognize that taxes should not be the reason for charitable giving. You do it because doing for others is one of the reasons you are on this earth and blessed with resources, mental, physical, and financial.

"The first question which the priest and the Levite asked was, 'If I stop to help this man, what will happen to me?' But...the good Samaritan reversed the question: 'If I do not stop to help this man, what will happen to him?’" Martin Luther King, Jr., said that. Something to think about.

Lewis Walker, CFP®, is a financial life planning strategist at Capital Insight Group; 770-441-3553. Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of SFA which otherwise is unaffiliated with Capital Insight Group. He is a Gallup Certified Clifton Strengths Coach and a Certified Exit Planning Advisor (CEPA®).

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