Maximizing Your Impact: The Power of Philanthropy

Understanding the relationship between philanthropy and tax relief can help inform decisions when it comes to financial planning. Below we will provide a few key tips and reminders, and explain four ways of giving that may provide substantial tax benefits.

Philanthropy and Tax Relief: A Win-Win Proposition

A genuine desire to improve the lives of others and contribute to the betterment of society is the reason for philanthropy at its core. However, often less emphasized, is the significant tax relief opportunities that your donation can provide. Individuals can reduce their tax burden by strategically planning charitable contributions while supporting their favorite charity such as Orlando Health.

Charitable donations, whether cash, securities or property, can often be deducted from taxable income, lowering one’s overall tax liability. This deduction can be particularly advantageous for individuals with highly appreciated assets or for those wishing to lower the financial burden of a higher tax bracket.

Tips and Reminders for Maximizing Tax-Related Benefits

While the prospect of tax relief through philanthropy is enticing, navigating the process diligently is essential to ensure compliance with tax regulations and maximize the benefits. Here are some essential tips and reminders to consider:

1. Keep Detailed Records:   Maintain thorough documentation of all charitable contributions, including receipts, acknowledgment letters from charities, and records of non-cash donations. These records are vital to provide proof for deductions during tax filings and can help avoid potential audits.

2. Be Aware of Deadlines:   Stay informed about tax deadlines, including filing tax returns and making charitable contributions. Failure to meet a deadline can result in missed opportunities for tax deductions or possible penalties.

3. Stay Up to Date:   Tax law can change from year to year. Be sure to consult with your professional advisor to discuss modifications impacting your taxable income, and contact our planned giving team to learn of any new tax-saving strategies.

Gifts that Provide Tax Relief

In addition to traditional cash donations, several types of planned gifts may offer significant tax benefits for donors:

1. Appreciated Securities:   Donating appreciated stocks, bonds, or mutual funds directly to a charity can result in a double tax benefit. Not only do donors receive a charitable deduction for the fair market value of the securities, but they also avoid capital gains tax on the appreciation.

2. Qualified Charitable Distributions (QCDs):   Individuals aged 70½ or older can donate directly from their Individual Retirement Accounts (IRAs) to eligible charities through QCDs. These distributions count towards satisfying required minimum distributions (RMDs) and are excluded from taxable income, providing a tax-efficient way to support charitable causes.

3. Donor-Advised Funds (DAFs):   Establishing a DAF allows donors to contribute a variety of assets, receive an immediate tax deduction, and recommend grants to charities over time. DAFs offer flexibility and tax efficiency, making them an attractive option for philanthropic giving.

4. Charitable Trusts:   Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) are irrevocable trusts that provide income to beneficiaries for a specified period before the remaining assets are transferred to charity. Both types of trusts offer tax benefits, including income tax deductions, estate tax savings, and the potential for capital gains tax avoidance.

By utilizing gifts that provide tax relief, individuals can leverage their philanthropic efforts to achieve both personal and financial goals while making a meaningful difference in their communities.