Tax data from the past year demonstrates that a genuine desire to do good motivates a majority of charitable donations. In 2018, new tax laws went into effect that reduced the tax benefits of itemizing deductions such as charitable donations with a larger standard deductible. Nevertheless, according to Forbes, charitable donation amounts in 2019 were the third-highest on record, amounting to $292 billion donated to charity altogether in the United States.
There are many good reasons to donate to charity, and despite the new laws, getting tax benefits can still be one of them. Charitable planning options can reward you and the organization of your choice, both now and in the future.
Donation of appreciated assets
Perhaps your investments in the stock market have paid off and now you want to use that money to do some good. You could sell the stock to give to charity, but then you would have to pay capital gains taxes on it, which would reduce both the amount that you could deduct from your income taxes and the contribution that the charity would receive. You can avoid the capital gains tax by donating the stock directly to the charity, meaning that the organization would receive the full amount and you would be able to deduct more from your income taxes.
Creation of a charitable remainder trust
When you create a charitable remainder trust, you name the organization to receive the assets after your death as a beneficiary. In the meantime, the trust generates income for you without having to worry about gift, estate or capital gains taxes. You can then combine the two techniques by funding your charitable remainder trust with appreciated assets.
