Charitable Planning

If you give the gift of equity (stocks) that have increased in value since you purchased them, then you can avoid paying taxes on the gains!

The recipient benefits from any gains in the stock’s price. Which also means that the recipient must pay taxes on those gains at their tax bracket.

In other words, you cannot get a step-up in cost basis by gifting an appreciated investment.

You can give away as much as you want to anyone you want at any time you want. Unless you are worried about taxes, in which case you want to be more careful.

The tax limit for 2023 is $17,000. This is called the annual gift tax exclusion. You may give up to this amount from a person, to a person, in 2023. A married couple may double this amount. And if the recipient is married, you may double it again. Two people would be able to give two people $68,000 in a single year without a tax problem.

For the most recent gifting limits, browse to Resources > Go Tax Free.
https://assetsandincome.com/go-tax-free-life-insurance-roth-iras/

If you give more than the annual gift tax exclusion amount, then you are supposed to file a gift tax return, IRS form 709. And you are supposed to file it every year until your death, documenting the total gifts you have made to make sure that they do not exceed the lifetime gift limit. Currently, the lifetime limit is linked to the estate tax limit. In 2023 it is the largest it has ever been: $25.84 million.

For the most recent gifting limits, browse to Resources > Go Tax Free.
https://assetsandincome.com/go-tax-free-life-insurance-roth-iras/

No tax deductions are allowed for gifts to people. You can get a tax deduction for a gift to a charity.

Charities file as tax-exempt organizations. But not all tax-exempt organizations are charities. Make sure to talk with your charity to find out what type of charity they are and how much of a tax deduction you will receive for your gift. For the detailed answer to this question, refer to IRS Publication 526.

If your charity is a large organization, they may be filed as a “50% charity”. If that is the case, then you can make an annual tax-deductible cash gift of up to 60% of your taxable income every year. However, if you are making a gift other than cash, your limit is reduced to 50% of your AGI for a gift to a “50% charitable organization.” If you want to make a large gift, ask your charity if they qualify with the IRS as a “50% charitable organization.”

If you are giving to a smaller charity, then they may be subject to a 30% or 20% AGI limit for your tax deduction. And if you are giving to multiple organizations subject to different rules, you will want to get the biggest tax deduction you can. You can refer to IRS Publication 526 for more details, and examples.

Or you can just ask for help from your wealth manager at A&I!