Category Archives: Charitable Planning

April 26, 2018

Charitable Giving Under New Tax Laws An Overview of Sensible Strategies

Written by Andrew Hunt

Now that the 2017 tax season is a wrap for most Americans, it’s time to start contemplating how the 2017 Tax Cuts and Jobs Act (TCJA) will impact your current and future tax plans. One of the frequently asked questions we’ve been fielding is on charitable giving: How can you keep giving, and get a little back on your taxes? Following are four practical possibilities to consider for charitable giving under the TCJA rules.

  1. Stagger Your Giving

Technically, you can still itemize charitable deductions. However, it’s now much more difficult to benefit from doing so annually. The TCJA not only restricts or eliminates several other formerly itemizable write-offs, it essentially doubles the standard deduction to $24,000 for couples filing jointly and $12,000 for single individuals.

As a result, many families who used to itemize and realize tax benefits from their deductible donations will usually decide they’re better off taking the standard deduction instead – even though it means they’ll receive no tax benefit for their charitable giving that year. In February 2018, the National Council of Nonprofits estimated that the higher standard deductions would effectively put the charitable deduction “out of reach of more than 87% of taxpayers.”

A possible work-around is to stagger your giving and other deductible expenses. For example, you may be able to double up your charitable giving every-other year, in an effort to itemize in alternate years. In year one, give twice as much as you normally would if you can combine it with enough other deductibles to itemize and write off the expenses against taxes due. In year two, do what you can to minimize donations and other deductibles, and take the standard deduction instead … and so on.

  1. Unload a Highly Appreciated Holding

If you’re going to be donating anyway, consider doing so with highly appreciated securities like stocks, stock funds, property, or similar holdings that are worth considerably more than when you acquired them. If you sell a highly appreciated holding outside of a tax-sheltered account such as an IRA, you’ll pay capital gains taxes on the difference between its cost and its sale price, less expenses. If you instead donate it “in kind” to a non-profit organization (i.e., without selling it first), you triple its tax-wise potentials:

  1. Within the parameters described above plus a cap based on your Adjusted Gross Income, the holding’s full value is available to you as a charitable deduction in the year you donate it.
  2. You avoid capital gains tax on the unrealized gain.
  3. The charity is free to keep or sell the holding, also without incurring taxable gains.
  4. Do a Donor-Advised Fund

We cover DAFs in more detail in a separate post, but here’s a quick take on how they work:

  1. Make an irrevocable donation to a DAF sponsor, which acts like a “charitable bank.” The full amount of your donation is deductible in the year you fund the DAF. Plus, many DAFs accept in-kind holdings as described above (whereas not all individual charities can).
  2. Over time, you advise the DAF’s sponsoring organization on when and to whom to grant the assets. The DAF sponsor has final say, but you can expect they’ll honor your request unless your intended recipient is not a qualified charity or there are other unusual circumstances.
  3. Until the funds are distributed, the DAF sponsor typically invests the donated assets; any returns or appreciated value grows tax-free, givng your initial donation added impact.

In this manner, a Donor-Advised Fund (DAF) can help you stagger your charitable donation deduction as described above, without having to stagger your usual annual giving. For example, you could fund a DAF with five years’ worth of anticipated donations, and then make annual requests that donations be made to your charities of choice across five years. This should allow you to itemize the entire DAF donation in year 1, and take the standard deduction the rest of the time. Plus, you can fund your DAF using appreciated holdings.

In short, DAFs can be a handy giving tool. That said, they aren’t ideal for every donor, every time. Let us know if we can show or tell you more.

  1. Retirees: Donate Your Required Minimum Distribution

Again, if you’d be making charitable contributions anyway, it may well be tax-wise to donate your Required Minimum Distribution (RMD) as allowed by the IRS, instead of taking it as ordinary income.

During your working years, there are many advantages to funding tax-favored retirement accounts. But, eventually – when you reach age 70½, to be exact – you must begin taking RMDs from your tax-sheltered havens, whether or not you want to. There is a steep penalty if you fail to do so (with Roth IRAs being an exception to this rule).

RMDs are taxed the year you take them at your ordinary income tax rate. You can avoid extra taxes and higher taxable income (which may impact your Medicare premiums and have tax ramifications on your Social Security income) by donating some or all of your RMD to charity. The IRS allows you to donate up to $100,000 annually in this manner.

No New, But Possibly Improved Opportunities

It’s worth mentioning that none of these four tax-planning possibilities are new; they’ve all been available well before the TCJA passed. The difference is, they may be more applicable to you under the new tax codes.

As we always do with tax topics, we recommend touching base with your tax professional before making any big decisions. As a service to our clients, we are happy to arrange a group meeting among you, your accountant and a member of our firm to offer personalized advice and to best coordinate our efforts on your behalf. We’re also available for planning conversations or to answer additional questions you may have about your tax-wise giving goals.

March 1, 2018

Charitable Giving Under New Tax Laws Understanding the Donor-Advised Fund (DAF)

Written by Jason Hiley

No matter how the 2017 Tax Cuts and Jobs Act (TCJA) may alter your tax planning, we’d like to believe one thing will remain the same: With or without a tax write-off, many Americans will still want to give generously to the charities of their choice. After all, financial incentives aren’t usually your main motivation for giving. We give to support the causes we cherish. We give because we’re grateful for the good fortune we’ve enjoyed. We give because it elevates us too. Good giving feels great – for donor and recipient alike.

That said, a tax break can feel good too, and it may help you give more than you otherwise could. Enter the donor-advised fund (DAF) as a potential tool for continuing to give meaningfully and tax-efficiently under the new tax law.

What’s Changed About Charitable Giving?

To be clear, the TCJA has not eliminated the charitable deduction. You can still take it when you itemize your deductions. But the law has limited or eliminated several other itemized deductions, and it’s roughly doubled the standard deduction (now $12,000 for single and $24,000 for joint filers). With these changes, there will be far fewer times it will make sense to itemize your deductions instead of just taking the now-higher standard allowance.

This introduces a new incentive to consider batching up your deductible expenses, so they can periodically “count” toward reducing your taxes due – at least in the years you’ve got enough itemized deductions to exceed your standard deduction.

For example, if you usually donate $2,500 annually to charity, you could instead donate $25,000 once each decade. Combined with other deductibles, you might then be able to take a nice tax write-off that year, which may generate (or be generated by) other tax-planning possibilities.

What Can a DAF Do for You?

DAFs are not new; they’ve been around since the 1930s. But they’ve been garnering more attention as a potentially appropriate tax-planning tool under the TCJA. Here’s how they work:

  1. Make a sizeable donation to a DAF. Donating to a DAF, which acts like a “charitable bank,” is one way to batch up your deductions for tax-wise giving. But remember: DAF contributions are irrevocable. You cannot change your mind and later reclaim the funds.
  2. Deduct the full amount in the year you fund the DAF. DAFs are established by nonprofit sponsoring organizations, so your entire contribution is available for the maximum allowable deduction in the year you make it. Plus, once you’ve funded a DAF, the sponsor typically invests the assets, and any returns they earn are tax-free. This can give your initial donation more giving-power over time.
  3. Participate in granting DAF assets to your charities of choice. Over time, and as the name “donor-advised fund” suggests, you get to advise the DAF’s sponsoring organization on when to grant assets, and where those grants will go.

Thus, donating through a DAF may be preferred if you want to make a relatively sizable donation for tax-planning or other purposes; you’d like to retain a say over what happens next to those assets; and you’re not yet ready to allocate all the money to your favorite causes.

Another common reason people turn to a DAF is to donate appreciated stocks in kind (without selling them first), when your intended recipients can only accept cash/liquid donations. The American Endowment Foundation offers this 2015 “Donor Advised Fund Summary for Donors,” with additional reasons a DAF may appeal – with or without its newest potential tax benefits.

Beyond DAFs

A DAF isn’t for everyone. Along the spectrum of charitable giving choices, they’re relatively easy and affordable to establish, while still offering some of the benefits of a planned giving vehicle. As such, they fall somewhere between simply writing a check, versus taking on the time, costs and complexities of a charitable remainder trust, charitable lead trust, or private foundation.

That said, planned giving vehicles offer several important features that go beyond what a DAF can do for a family who is interested in establishing a lasting legacy. They also go beyond the scope of this paper, but we are happy to discuss them with you directly at any time.

How Do You Differentiate DAFs?

If you decide a DAF would be useful to your cause, the next step is to select an organization to sponsor your contribution. Sponsors typically fall into three types:

  1. Public charities established by financial providers, like Fidelity, Schwab and Vanguard
  2. Independent national organizations, like the American Endowment Foundation and National Philanthropic Trust
  3. “Single issue” entities, like religious, educational or emergency aid organizations

Within and among these categories, DAFs are not entirely interchangeable. Whether you’re being guided by a professional advisor or you’re managing the selection process on your own, it’s worth doing some due diligence before you fund a DAF. Here are some key considerations:

Minimums – Different DAFs have different minimums for opening an account. For example, one sponsor may require $5,000 to get started, while another may have a higher threshold.

Fees – As with any investment account, expect administration fees. Just make sure they’re fair and transparent, so they don’t eat up all the benefits of having a DAF to begin with.

Acceptable Assets – Most DAFs will let you donate cash as well as stocks. Some may also accept other types of assets, such as real estate, private equity or insurance.

Grant-Giving Policies – Some grant-giving policies are more flexible than others. For example, single-entity organizations may require that a percentage of your grants go to their cause, or only to local or certain kinds of causes. Some may be more specific than others on the minimum size and/or maximum frequency of your grant requests. Some have simplified the grant-making process through online automation; others have not.

Investment Policies – As touched on above, your DAF assets are typically invested in the market, so they can grow tax-free over time. But some investments are far more advisable than others for building long-term giving power! How much say will you have on investment selections? If you’re already working with a wealth advisor, it can make good sense to choose a DAF that lets your advisor manage these account assets in a prudent, fiduciary manner, according to an evidence-based investment strategy. (Note: Higher minimums may apply.)

Transfer and Liquidation Policies – What happens to your DAF account when you die? Some sponsors allow you to name successors if you’d like to continue the account in perpetuity. Some allow you to name charitable organizations as beneficiaries. Some have a formula for distributing assets to past grant recipients. Some will roll the assets into their own endowment. (Most will at least do this as a last resort if there are no successors or past grant recipients.) Also, what if you decide you’d like to transfer your DAF to a different sponsoring organization during your lifetime? Find out if the organization you have in mind permits it.

Deciding on Your Definitive DAF

Selecting an ideal DAF sponsor for your tax planning and charitable intent usually involves a process of elimination. To narrow the field, decide which DAF features matter the most to you, and which ones may be deal breakers.

If you’re working with a wealth advisor such as Hiley Hunt Wealth Management, we hope you’ll lean on us to help you make a final selection, and meld it into your greater personal and financial goals. As Wharton Professor and “Give and Take” author Adam Grant has observed, “The most meaningful way to succeed is to help others succeed.” That’s one reason we’re here: to help you successfully incorporate the things that last into your lasting, charitably minded lifestyle.

July 12, 2017

Donor-Advised Funds

Written by Jason Hiley

Americans donate billions to charity annually. If you give to charity, you need to know about one of the best tools to facilitate generosity: Donor-Advised Funds (DAFs).

DAFs date from the 1930s but did not become popular until the 1990s. DAFs act as vehicles for receiving gifts, often of appreciated stock, and then distributing cash grants to charities selected by the one making the donation. DAFs make the process of transferring appreciated stock and designating checks as simple as a bank’s bill-paying system.

All DAF donors receive a tax deduction on the date of transfer. You can also transfer stock during one calendar year and receive a deduction even if the DAF completes distribution of grant money to a charity in a subsequent year. According to Internal Revenue Service rules, you calculate the value of your donation and the resulting fixed deduction based on the average of the high and the low market price on the day of transfer. (You are responsible for computing
this value.)

After receipt, the stock you gifted is sold and the DAF, itself a charity, pays no tax on any capital gain realized. The proceeds may remain in cash or you may direct the DAF to invest those assets for potential further appreciation (usually in a professionally managed separate account). Any subsequent change in the value of the account does not change the amount you can deduct on
your taxes.

As the donor, you direct to which charities the DAF distributes assets. Officially, the DAF owns the assets and is not legally bound to use them as you direct, but it is exceedingly rare for a DAF to not follow the donor’s advice.

Most DAFs also maintain a database of 501(c)(3)  tax-exempt charities (based on those organizations’ IRS 990 filing) from which you chose. After you suggest an amount to gift and a charity to receive the gift, the DAF vets and processes your suggestion to ensure the organization qualifies as a public charity under the IRS code. DAFs also handle all record keeping and due diligence and can protect your identity if you want to give anonymously.

Donor-advised funds are the fastest growing charitable giving vehicle in the United States, with more than 269,000 donor-advised accounts holding over $78 billion in assets. To put that in perspective, the Bill and Melinda Gates Foundation has about $39.6 billion in assets.

Besides consider a DAF, here are other ways to make your charitable giving more significant:

Focus your effort. Passionate giving is more sustainable than spreading donations to every good cause or everyone who asks. Consider focusing your donations to just a few charities. Think through why you are giving and what you feel passionate about.

Find bang for the buck. Fund programs that produce the greatest effect for the least money and focus on long-term positive outcomes.

Include the next generation. You can include your children in the giving process or even help them gift some of their own money.

Talk to Your Financial Advisor. If you’re considering a DAF or want to learn more, give Hiley Hunt Wealth Management a call so that we can walk through the process together.

June 20, 2017

Advanced Philanthropy: Private Foundations

Written by Jason Hiley

For many affluent individuals, occasional gifts to a favorite charity may satisfy their charitable inclinations. The added incentive of an often substantial tax deduction, coupled with various estate planning benefits, is sometimes the driving force behind such charitable gifts. However, for some individuals, philanthropy is a far more serious endeavor, often involving a succession of substantial gifts of at least $5 to $10 million that may necessitate the need for control and general oversight. In such situations, a private foundation can be an ideal mechanism for managing a large, continuous charitable giving program.

How much do you know about private foundations?

Test your knowledge with this short quiz.

1.) True or False. The charitable deduction for contributions will be limited depending on the type of charitable organization that is ultimately receiving the gift from the private foundation and the type of gift being made.

2.) True or False. There are generally four types of private foundations: nonoperating; operating; company-sponsored; and supplementary.

3.) True or False. The three ways a private foundation can be structured are: a nonprofit corporation; a trust; and an unincorporated association.

Learn more about private foundations.

In its simplest form, a private foundation is a charitable, grant-making organization that is privately funded and controlled. When properly arranged and operated, a private foundation is an income tax-exempt entity, and tax deductions are permitted for individuals (donors) who donate to them.

Contributions to a private foundation are deductible for gift and estate tax purposes. The income tax deduction of gifts to a private foundation is a bit more complex. Generally, the deduction is based on the fair market value (FMV) of the gift (at the time of the gift) and is limited by the donor’s adjusted gross income (AGI). The charitable deduction will also be limited (to 20%, 30%, or 50%) depending on the type of charitable organization that is ultimately receiving the gift from the private foundation and the type of gift being made. Gifts that are not cash or publicly-traded securities, and that are valued at more than $5,000, require adherence to additional rules in order to ensure deductibility.

In addition to the advantages of a tax deduction (which is generally not exclusive to private foundations), private foundations may also offer an array of other benefits. Because a private foundation is typically established to manage a long-term charitable gifting program, it may, in turn, highlight the philanthropic presence and identity of the donor within the community and/or a particular charitable cause. It can also serve to create a family charitable legacy while, at the same time, protecting individual family members from the pressures of other charitable appeals. Finally, a private foundation can serve as an appropriate mechanism for controlling distributions to a charity(ies), as well as determining which charities the foundation will benefit.

On the Technical Side

When a private foundation is established, there are two issues that need to be addressed. First, what type of private foundation should the donor establish? And second, how should the private foundation be structured? There are generally three types of private foundations: 1) nonoperating; 2) operating; and 3) company-sponsored. Each type of foundation has specific characteristics that make it appropriate for a particular situation. There are also strict requirements and guidelines that must be followed for each type of foundation.

The most common type of foundation is nonoperating. Essentially, a donor, or group of donors, makes contributions to the foundation, which, in turn, makes grants to a charity(ies). In this case, the donor has no direct participation in any charitable work. There are several variations of this type of foundation.

On the other hand, in an operating foundation, the foundation may have direct involvement in charitable causes (e.g., an inner city youth center), while retaining the tax benefits of a “private” foundation (although, in some respects, operating similarly to a “public” charity). To qualify as an operating foundation, it must also meet several requirements and tests.

In addition, a company-sponsored foundation can be used when the majority of contributions are from a for-profit corporate donor. Generally, this type of foundation operates similar to a non-operating foundation. It is usually managed by corporate officers and has the added benefit of allowing some contributions to accumulate over time. This can help the foundation make continual grants when corporate profits are low (a time when, ordinarily, contributions would be otherwise forgone).

After careful thought is given to the type of foundation to be established, the foundation’s structure should be taken into consideration. There are three ways in which a foundation can be structured: 1) as a nonprofit corporation; 2) a trust; or 3) an unincorporated association.

There are a number of factors to be weighed when deciding on which structure is best. Generally, if the donor intends to keep the foundation in existence permanently, a nonprofit corporation or trust may be a better choice. Additional considerations include: state and local laws governing private foundations; the type of foundation; the type of donor; assessing the need or desire to make future changes or delegate responsibilities; and personal liability issues.

Complex, Yet Effective

Creating and maintaining a private foundation is much more involved than the use of more traditional charitable giving mechanisms (e.g., charitable remainder trusts (CRTs)). Therefore, legal and accounting professionals who have experience with private foundations must play a significant role in such an endeavor. In addition, due to the added complexity and need for highly specialized legal and tax expertise, the expenses for design, set-up, management, and grant administration in a private foundation will generally be substantial. Typically, a private foundation is only viable for individuals who intend on making periodic gifts in excess of $5 million.

Certainly, the private foundation allows today’s philanthropist the opportunity to manage substantial charitable gifts, as well as the ability to actually become involved in charitable work, if he or she so chooses. It also affords the donor the opportunity to be recognized for charitable giving, while solidifying his or her philanthropic legacy. This article serves as a general overview of a very complex planning area. Like all advanced planning issues, appropriate counsel should be sought in order to meet the goals and objectives of all involved parties.

Quiz Answers: 1) True; 2) False; and 3) True

December 21, 2015

Giving Thoughts

Written by Andrew Hunt

As year-end nears, we hope you’ve saved time in your busy holiday schedule to pause and give thanks. At Hiley Hunt Wealth Management, we have so very much to be thankful for! To share our gratitude, we’d like to give you some thoughts. Thoughts on giving, that is.

As the London-based Charities Aid Foundation (CAF) describes it, “The impulse to give, to help others if you can, is a natural human instinct.”

It’s easy for that “data point” to get buried in the barrage of news we read to the contrary. But what if we adopt the same long-term perspective for investing and personal giving alike?

If you view our global capital markets close up and colored by the heat of the moment, it’s easy to grow disheartened and lose faith in the market’s ability to prevail. That’s why, as an investment advisor, we are forever stressing how important it is to consider your investments from a comfortable distance, through the clarifying lens of empirical evidence, and in the context of patiently participating in decades of rich – and likely enriching – human enterprise.

It might help to think about charitable giving from the same vantage point. Thanks to research-oriented organizations such as CAF, http://givingusa.org/, GivingPledge.org and many others, the evidence on our giving proclivities becomes clear, with much room for optimism to be found.

Myanmar, one of the world’s poorest nations, is also THE most generous. In its annual World Giving Index, CAF assesses “generosity” on three levels: helping strangers, donating money to a charity, and donating time to an organization. Based on its most recent data, CAF found that Myanmar ranked highest in donating both time and money, with a whopping 92 percent of those surveyed allocating a portion of their hard-earned money to charity.

Some of the world’s wealthiest families have been dedicating the majority of their wealth to philanthropy. Most recently, Mark Zuckerberg and his wife Priscilla Chan made headline news by informing their newborn daughter that they were going to pledge 99% of their Facebook shares to a giving mission, to make the world a better place for her.

GivingPledge.org has been quietly accumulating a collection of similar pledges for years from ultra-wealthy families, both famous and unknown. As Warren Buffett described in his pledge: “Were we to use more than 1% of my claim checks (Berkshire Hathaway stock certificates) on ourselves, neither our happiness nor our well-being would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others.”

Most of the rest of us appear to be doing our bit as well. For example, according to a June 2015 Giving USA press release: “Americans gave an estimated $358.38 billion to charity in 2014, surpassing the peak last seen before the Great Recession.” The figure represented the highest level of giving measured in the organization’s 60 years of reporting on it, with more than 70 percent of the donations coming straight from individual donors. Here’s to us regular folk!

Will our giving cure all that ails the world? The evidence tells us this might be a tall order indeed. But we’ll echo one of the lesser-known GivingPledge.org participants, Indian-American businessman and 5-Hour Energy mogul Manoj Bhargava: “We may not be able to affect human suffering on a grand scale but it will be fun trying.”

We wish you and yours a prosperous and fun-filled 2016.

We would love to invite you to learn more about Hiley Hunt Wealth Management and who we serve in Omaha, NE –Financial Planning and Investment Management.

June 8, 2015

Plan Your Giving

Written by Jason Hiley

There are numerous complex tax rules regarding charitable contributions, so it is advisable to seek professional guidance to help you evaluate your own personal situation. Generally speaking, if you itemize your deductions on your tax return, gifts to qualified charities are deductible in the year they are made.

Most people simply write a check or donate cash for their charitable contributions; however you may be missing out on an additional tax savings that could help stretch your charitable dollars farther.

Rather than donating cash, a gift of long-term (held more than 12 months) appreciated stock or mutual funds will result in two tax benefits.  You will be able to deduct the fair value of the stock as an itemized deduction, and you will also avoid the realized gains that would be associated with the sale of the appreciated shares.

For example, let’s say you plan to donate $20,000 to your favorite charity.   To do this you plan to sell stock worth $20,000 you purchased several years ago for $10,000.  After the sale of the stock, you would owe federal capital gains tax of 15% on the gain (state tax may also apply), resulting in a tax bill of $1,500.

If however you donate the $20,000 in stock to the charity, the charity will avoid paying taxes on the sale of the stock.  You enjoy the additional benefit of never having to pay taxes on the stocks appreciated value resulting in a tax savings of $1,500!

Accelerate Charitable Contributions for Larger Impact

Consider giving more in years where you are subject to higher income tax rates for maximum benefit.   If your income fluctuates from year to year, or you have a significant event that spikes your income for a single year, accelerating your giving may produce bigger tax savings.   If you like the idea of accelerating your contributions from a tax perspective, but dislike the idea of uneven contributions from year to year, consider opening a Charitable Checkbook® at the Omaha Community Foundation (www.omahafoundation.org).

When you donate cash or appreciated securities to a Charitable Checkbook®, you are eligible for a tax deduction in the year the donation is made.  You are then able to decide on the timing of your grants to charity – there is no requirement to direct a grant from your account in a given year.  You can take the deduction in one year, and spread the gift to the actual charities out over several years.

With a little reflection and financial planning, you can become a more proactive philanthropist.  Like Bill and Jane, you may find this approach more rewarding in a personal and financial sense.

May 20, 2015

Taking a Proactive Approach to Philanthropy

Written by jasonhiley

Jane smiled as she read the note from a recent graduate -a recipient of the scholarship fund she and her husband Bill had begun shortly after retirement.   Passionate about education, the couple began giving annually years ago to their alma mater, the place where they first met as young teachers’ assistants.

Education is their lifelong passion.  At the core of their belief system is a desire for all children to have access to higher education, regardless of financial circumstances. Thanks to some careful estate planning, Bill and Jane knew that the scholarship fund would continue beyond their lifetimes leaving a legacy of which they could be proud.

Bill and Jane are not unique; many of us hold philanthropic causes close to our hearts that we wish to further. However, many of us are reactive rather than proactive in our philanthropic pursuits; we dedicate our charitable resources to support charities of others rather than those about which we care most deeply.

In order to become a more proactive philanthropist, you will need to do some reflection and spend some time planning your course of action.

Identify Your Passion and Select a Charity

If you haven’t already, begin by identifying the cause(s) that matter most to you.  The following questions may be helpful in this process:

  • What issues are you most passionate and excited about?
  • What people or events have most shaped your values and beliefs?
  • What is the most enjoyable charitable experience you have ever had?
  • What problems in the world do you find most troubling?
  • What injustices do you see on the news that make you angry?

After identifying a cause, the next step is to determine the charity/charities to which you will contribute.  If you don’t already have an organization in mind, there are a number of resources available to assist you in selecting a charity. The websitewww.charitynavigator.org is an excellent online resource for finding charities with a national focus.  The site allows you to browse charities by category, view top ten lists based on various criteria, or review thousands of charitable ratings.   In addition to the information about specific charities, the site also offers a host of other tips and resources to help you make the most out of your charitable giving.

If you would like to concentrate your efforts locally, Nonprofit Association of the Midlands (www.nonprofitam.org ) will be launching an online database called Community Compass in the next few weeks.  This comprehensive database will have publicly available data on every non-profit organization and program in Nebraska and in 19 counties in Southwest Iowa.

Plan Your Giving

There are numerous complex tax rules regarding charitable contributions, so it is advisable to seek professional guidance to help you evaluate your own personal situation. Generally speaking, if you itemize your deductions on your tax return, gifts to qualified charities are deductible in the year they are made.

Most people simply write a check or donate cash for their charitable contributions; however you may be missing out on an additional tax savings that could help stretch your charitable dollars farther.

Rather than donating cash, a gift of long-term (held more than 12 months) appreciated stock or mutual funds will result in two tax benefits.  You will be able to deduct the fair value of the stock as an itemized deduction, and you will also avoid the realized gains that would be associated with the sale of the appreciated shares.

For example, let’s say you plan to donate $20,000 to your favorite charity.   To do this you plan to sell stock worth $20,000 you purchased several years ago for $10,000.  After the sale of the stock, you would owe federal capital gains tax of 15% on the gain (state tax may also apply), resulting in a tax bill of $1,500.

If however you donate the $20,000 in stock to the charity, the charity will avoid paying taxes on the sale of the stock.  You enjoy the additional benefit of never having to pay taxes on the stocks appreciated value resulting in a tax savings of $1,500!

Accelerate Charitable Contributions for Larger Impact

Consider giving more in years where you are subject to higher income tax rates for maximum benefit.   If your income fluctuates from year to year, or you have a significant event that spikes your income for a single year, accelerating your giving may produce bigger tax savings.   If you like the idea of accelerating your contributions from a tax perspective, but dislike the idea of uneven contributions from year to year, consider opening a Charitable Checkbook® at the Omaha Community Foundation (www.omahafoundation.org).

When you donate cash or appreciated securities to a Charitable Checkbook®, you are eligible for a tax deduction in the year the donation is made.  You are then able to decide on the timing of your grants to charity – there is no requirement to direct a grant from your account in a given year.  You can take the deduction in one year, and spread the gift to the actual charities out over several years.

With a little reflection and financial planning, you can become a more proactive philanthropist.  Like Bill and Jane, you may find this approach more rewarding in a personal and financial sense.