There are opportunities for generosity everywhere this year: pledges you want to keep and places where you can step in to help exactly as you know God is calling you to do. At the same time, you may be hesitant to deplete your cash reserves because there is so much uncertainty right now.
Consider the following five tax-smart options to help you give as God is leading you and to honor your giving commitments without depleting your cash:
1. Give appreciated assets
By gifting real estate holdings, business interests, or other appreciated assets directly to a Giving Fund at NCF, you’ll most likely be able to receive a fair market value deduction and avoid the capital gains tax, while the charity, as an owner, may enjoy significantly lower taxes of future company profits or sale proceeds. Essentially, you are giving pre-tax value and still getting the charitable deduction – a double benefit – which is a much wiser way to give than cash
2. Give appreciated securities
Appreciated securities are another asset that can be gifted. By carrying out your regular giving using appreciated securities, you increase your giving capacity by trading current or future tax exposure for more charity today. Instead of writing checks to charity, give appreciated securities to charity and send the cash to your investment portfolio instead. Then you can use the cash you would have given to the charity to replenish your investment account and rebalance your portfolio.
Appreciated securities (assets held for more than one year) are investments that have increased in value from the time they were purchased, and can take the form of publicly traded stock, exchange-traded funds (ETFs), closely held stock, or mutual funds.
3. Give from deferred-income accounts
If you have deferred income such as retirement accounts, restricted stock units (RSUs), non-qualified stock options, or commercial annuities, these might be smart assets to strategically monetize for additional cash-giving capacity. With the 100% AGI deduction this year, you may be able to accelerate your receipt of this deferred income and offset the resulting taxes with a charitable gift of proceeds. However, one important thing to note before accelerating your receipt of these deferred-income assets is to first consult your financial advisors to be sure you will still have more than you need to cover your current and future personal financial needs.
4. Give from an annuity
A non-qualified annuity isn’t a retirement account, but it works in a similar way. If you have excess in an annuity, you may choose to cash it out, pay tax on the income, and then make a gift in the amount you withdrew. The gift may offset the tax. Always consult with your tax advisors regarding your specific situation.
5. Give life insurance
Some givers have life insurance policies with significant cash value that they will not need for their personal financial goals. After consulting with their financial advisors, those givers could withdraw from the policy’s cash value and give to charity up to 100 percent of AGI this year. You can provide the charities of your choice with a significant sum of money and create a lasting legacy.
We hope these tax-smart strategies will help you choose what to give, so that it frees you up to experience the joy that giving can bring and to participate with the charities you care about on a deeper level.
We pray that God will bless you abundantly, so that you’ll have everything you need to accomplish every good work you hope to do. May your giving result in an overflowing of praise to the Lord!
Please note that these options are allowable under current tax laws. Please consult consult your tax advisors to determine what is best for your situation.