CARES, IRA, DMD, DAF…Do the tax changes (and acronyms) over the past couple of years have your head spinning? Here are some tips to get a start on your year-end tax planning.
Tax-Wise Charitable Planning Strategies
There are a number of charitable planning strategies that can help you lower your income and taxes this year. Here are some ways you can shift tax dollars to charitable dollars and support with Texas Land Conservancy.
- IRA Charitable Rollover – People aged 70 ½ or older can roll over up to $100,000 from their IRA to a qualified charity, such as Texas Land Conservancy. This may lower your income and taxes.
- Outright Gift of an Asset – Make a gift of stock, real estate, or another asset, avoid paying capital gains on the transfer and receive a tax-saving charitable deduction.
- Donor Advised Fund (DAF) – Make a tax-deductible gift to a DAF, which gives you the ability to make grants to your favorite charities this year and in future years.
- CARES Act Extended – Congress extended charitable giving provisions from last year’s CARES Act into 2021, providing charitable deductions for donors who do not itemize, as well as increased limits for those who do.
Make Your IRA Work for You
Congress made the IRA charitable rollover permanent. The rollover law allows taxpayers who are required to withdraw money from their IRAs to give directly to charity. Because the rollover may count against our required minimum distribution (RMD), making an IRA rollover gift to a charitable organization like Texas Land Conservancy could reduce your income and taxes.
Last year, Congress gave IRAs a much-needed vacation. No one had to make a required minimum distribution from their IRAs. This year, the RMD is back for everyone 72 years and older. Most people do not like taking money from their IRA. They have saved for years, and they would prefer to let it grow. Worst yet, when you take the RMD, you pay income tax on that distribution.
While you still must distribute money from your IRA if you are age 72 or older, you can do it in a tax-advantaged way. If you are age 70 ½ or older, you can contact your IRA administrator and ask them to make the distribution directly to Texas Land Conservancy. It’s a great way for you to support our mission to protect the land, water, and wildlife of Texas. While you won’t receive an income tax deduction for a rollover gift, you also won’t pay any income tax on the transfer.
This transfer only works for IRAs and not other retirement accounts. You may be able to roll over your 401(k) or other plans into an IRA and take advantage of this strategy. Check with your tax advisor to learn more about how you can use your RMD to positively impact the landscape of Texas forever – and lower your taxes.
Other Year-End Considerations
While there are some obvious ways of saving taxes, such as increasing your charitable giving, there are also some subtle ways to maximize your savings and minimize your tax bill, or to support the work of Texas Land Conservancy without affecting your personal financial security. Consider these strategies as part of your year-end planning:
- If you have high-performing stocks you would like to sell but would result in steep capital gains, transfer your stock to Texas Land Conservancy.
- If you have a Donor Advised Fund (DAF) and want to make a gift to Texas Land Conservancy, you can make a gift from your DAF to support our mission without affecting your personal financial security.
- If you do not itemize when filing your tax return, the CARES Act allows a special tax deduction up to $300 ($600 for joint filers) if you make a cash gift to a charity such as Texas Land Conservancy.
- If you do itemize when filing your tax return, the CARES Act increased the deduction limit from 60% up to 100% of a donor’s annual income for cash gifts to charity. If you make a gift, you will be able to deduct more this year.
This information is not intended as tax, legal, or financial advice. Gift results may vary. Consult your personal financial advisor for information specific to your situation.