Philanthropy Matters | Year-End Giving
Philanthropy Matters | Year-End Giving
December 1, 2017
Authored by Kristen Willis, Director of Development
How to make the most of your year-end donationsThe holiday season is upon us and for many, it is not only a time for the exchange of gift wrapped presents, but a time of giving back.
Whether that means finding a way to help someone in need or supporting your favorite charity, at Day Kimball Healthcare we know and appreciate that it is most often a deeply personal and financial commitment – one deserving of thoughtful consideration from both perspectives. Through careful planning, a year-end gift can allow you to do more than you may have anticipated and still improve your own financial position. A gift to Day Kimball at year-end not only demonstrates your belief in our mission but also reinforces your commitment to making a difference in the lives of everyone who lives and works in Northeast Connecticut.
In addition to a feeling of personal satisfaction you get from helping family, friends, neighbors, and co-workers, it may also result in a more tangible return – in the form of a desirable tax benefit. So while the 2018 tax season might be the last thing on your mind this busy holiday season, it’s important to remember that these last few weeks of the year are your last chance to take advantage of tax benefits afforded by 2017 charitable donations. Before this year draws to a close, here are some questions and strategies to consider:When should you give?
First and foremost, you must itemize your deductions in order to receive credit for a charitable donation. For those who do, a gift made before January 1st is deductible in the year in which it is made. If you are issuing a check to us, the effective date of your contribution is the date it is hand-delivered or postmarked. Gifts of securities, on the other hand, require a little more planning to ensure a deduction this year. The gift is made on the day that we receive a properly endorsed stock certificate, or an unendorsed stock certificate and a properly endorsed stock power. If sending gifts of stock through the mail, it is best to send these documents separately. The gift date will then become that of the latest postmark. Gifts of securities made through electronic transfer are most common, and considered to be made on the date of transfer which is the date on which we receive the securities into our account. For gifts of real estate, the gift date is the date we receive a signed deed. Even though this part of the transaction can wait until the end of the year, it’s important to start the process early enough to ensure that a qualified appraisal has been completed before the gift is made. You will also want to contact us in advance, as we’ll need to determine the acceptability of the gift and consider the environmental condition of the property.What should you give?Outright Gifts of Cash:
Nothing is as simple and direct as giving cash. You can make a general donation, and we will utilize your gift for our greatest current need. You may also designate your gift for a specific purpose. Gifts of cash are deductible up to 50 percent of your adjusted gross income. Gifts in excess of 50 percent may be carried over as deductions into the next five years. Gifts of Appreciated Stock:
Gifts of stocks and other investments that have grown in value and that you have held for more than one year can become a substantial gift, made to us at low net cost to you. You receive a charitable deduction for the donation of the asset based on the fair market value on the date of the gift. Even more advantageous is that you avoid all federal capital gains tax that would otherwise be due if you were to sell the asset. For example, if you were to sell $1,000 worth of appreciated stock and are in the 15% tax bracket, you will pay 15% on the gains made on the stock. If all gain, $150 will be due in capital gains. You would then only have $750 to gift to us. However, if you transfer the stock directly to us, you can take the full $1,000 deduction and we will not have to pay any taxes when we sell the stock. Securities can be deducted for up to 30% of your adjusted gross income, allow you to avoid capital gains, and often affords the opportunity of making a bigger gift than you thought possible. Gifts of Real Estate:
Almost any real estate, developed or undeveloped, is potentially a charitable gift. If you’ve owned your home or other real estate for a long time, it likely has increased in value significantly. If you’d like to help fulfill our mission, your property opens the door to a unique giving opportunity: donate the property to us outright, place it in trust, or retain the use of it for life. Before you sell real estate that would result in a sizable capital gains tax, consider donating the property to us – you’ll avoid the tax and realize a charitable deduction for the full fair market value of the property; if you’ve owned the property for more than one year, consider turning it into a new income flow by creating an income-producing charitable gift plan such as a charitable remainder trust (discussed below); or if you want the tax advantage but want to continue living in your residence for your lifetime, consider a retained life estate. Even though we would not actually take possession of the property until after your lifetime, you get an immediate charitable income tax deduction because the gift cannot be revoked. All of these methods will enable you to enjoy personal financial benefits while supporting DKH in a meaningful way.Charitable Remainder Trusts:
These trusts are built with assets you contribute, such as securities, appreciated property such as real estate, or cash. Once placed in trust, the assets can be sold, avoiding capital gains, and the proceeds reinvested to produce a higher yield for the donor or other beneficiaries. Such an arrangement creates an immediate income tax deduction, based on a number of factors (such as the beneficiary’s age and amount of annual income); it precludes capital gains; allows personal and family needs to be met; and provides a wonderful gift for us. Gift arrangements that provide income like this come in numerous configurations and are valuable to explore, particularly for those considering retirement. Life Insurance:
No-longer-needed life insurance is a viable gift. Polices that are paid up may be deductible as gifts for their replacement value. Policies that still require premiums to be paid can be given, with the future premiums becoming deducted from annual income tax. Donors may qualify for income tax deductions by naming DKH as both the owner and beneficiary of the policy. A new policy naming DKH as a beneficiary would guarantee a future gift as well.Qualified Charitable Distributions:
Investors older than age 70 ½ who are taking required minimum distributions (RMD’s) for their traditional IRA’s can steer a portion of their distributions – up to $100,000, directly to DKH, thereby satisfying the RMD requirements. This strategy can be more beneficial than taking money out of the IRA, writing a check to us, and deducting it on your tax return. That is because the qualified charitable distribution amount, in contrast with an RMD that you spend or reinvest, will not inflate your adjusted gross income. This can keep you out of a higher tax bracket, qualify you for credits and deductions that you might not be eligible for with a higher adjusted gross income, and reduce the amount of your Social Security income that’s taxable. What really matters?
There is no doubt that the availability of the income tax deduction helps charitable people to be even more charitable, and focusing on the end of year is designed to remind donors of the date by which a gift must be made. Neither, however, is a substitute for the desire to help any charitable organization. It is not the amount that matters – gifts of any amount have a positive impact on our ability to provide the highest quality care possible, in the safest possible way, to ensure the best outcomes for our patients. We know that if you support DKH, it’s because you believe in our mission and for that, we thank you. As you contemplate the kind of year it has been and your charitable plans for the future, please feel free to call on us. We can provide you with additional information on a variety of gift options suited to end-of-year giving, or other planned gift options. Together with your tax advisor, we can help you plan and implement a year-end charitable gift to Day Kimball that takes advantage of available tax benefits and reflects your generous spirit.