- Timing: To qualify for a tax deduction this year, make your gift prior to December 31, 2021 (that’s just two weeks away). Most charities will supply a letter after your gift has been received. This provides documentation so you may claim a deduction on your schedule A when preparing taxes in the spring.
- Amount: Cash gifts up to $15,000 don’t have special reporting requirements. This allows a couple to give $30,000 a year ($15,000 each) to whomever they wish including charities. This means grandma may gift $15,000 to all her grandchildren, adult children, and a nonprofit without complexity should she choose. When gifts exceed these limits then a tax form is necessary. A lifetime gift limit (technically called lifetime exclusion) helps ease large one time or ongoing gifts. Often this provides donors the ability to avoid paying a gift tax.
- Frequency: A single gift is great; a recurring gift may be better. This grants charities and nonprofit organizations the ability to plan their resources accordingly each year.
- Cash or Asset: A cash gift, as it sounds, comes from earned income or perhaps income generated from investments. An asset gift may take many forms including a single stock, a portfolio of companies, an IRA, or even art or land. An asset gift often requires more thought and planning consideration then giving cash from income.
Giving is very personal, everyone has their own approach and opinion on the matter. We believe that an updated financial plan, which is cashflow based, may help determine what giving choices are doable. Each fall we cover charitable giving as a planning theme in our reviews with clients. It’s been exciting to watch all the good that’s been accomplished by our client’s kindness utilizing both cash and asset gifts this year. Incredible!
Many families are surprised at what’s possible when contemplating gifts, regardless of the amount. It would be difficult to simply pull numbers out of the air or guess at what may be given. Having a date and duration specific financial plan that incorporates giving in addition to income and spending makes gifting possible.
You don’t need to defer your gifts until such a late age as often is the norm. That seems to be the default approach once a predetermined level of wealth is achieved. Bummer. Waiting this long may not allow the donor to see first-hand how their generosity is utilized. One of many benefits to giving is watching the positive impact it has on others. Be it one individual or an entire organization, this good will is powerful to all who participate.
It’s not too late to give this year or to incorporate a giving strategy into your financial plan looking forward. What organizations or nonprofits have had an impact on you or those you care about? Start with a doable and meaningful contribution you define, after all it’s your gift. It’s good to give to others.
If you are uncertain or have questions we’d be happy to chat with you Chat - with Ryanor Contact Ryan.
Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Flowerstone Financial are not affiliated.
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