Individuals may give away up to $13,000 per person per year without filing a gift tax return. Recent legislation raised the lifetime gift tax exclusion amount to $5,000,000. A married couple can gift $26,000 per year and $10 million over their lifetime with no tax consequences. An exception to this general rule is charitable gifting.
Giving to charity allows an individual to give back to his or her community and to society. When you determine that gifting is important to you, you must choose a charity that aligns with your values. Often, people want to assist a school, organization or entity that is significant to them.
Charitable gifting has tax and non-tax benefits. You can donate to charitable causes or institutions during your lifetime or make charitable contributions in a last will and testament.
Making a gift during your lifetime ensures that your donation is used as you intend, offers you a tax benefit and allows you to receive the recognition of the charity while you are alive. Periodic planned giving throughout your lifetime is a commitment you may have already made.
Leaving a bequest in your last will and testament often allows you to leave a larger bequest and is a good way to avoid estate taxes. Gift giving in your will reduces the size of your estate. This may, in turn, decrease the amount of probate expenses and can diminish or eliminate estate taxes.
The Internal Revenue Service allows charitable tax deductions for different types of property and different types of qualified charities. Internal Revenue Code Section 503(c) grants tax-free status to charitable entities. In order to take the deduction, the charity must be a qualified charity recognized by IRC § 503(c). The gift must be completed by the end of the year for which the tax deduction is taken. In addition, only gifts of cash or property are allowed. No deduction is allowed for services rendered to the charity. If the charitable gift is made in your will, your estate may claim the charitable deduction.
Sophisticated gifting techniques are available. Some allow you to make a future gift while enjoying a tax benefit now. Others allow you to retain the benefit of a gift (use of land or income from an investment) after making the gift. But the simplest method and the one most often chosen is to make a specific bequest in a last will and testament.Information provided by Ross Barnett, attorney for Abendroth and Russell Law Firm, 2560 73rd St., Urbandale, 278-0623, www.ARPCLaw.com.