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Charitable Bunching: How this Tax-Deduction Strategy Works

5 hours ago By The Signatry

Use a DAF to optimize your charitable deductions across tax years. There are only a few months left of 2022, which means it’s time to start thinking about one of life’s greatest certainties: taxes. Using a donor advised fund (DAF) can make it easier to itemize your charitable deductions – but what if your charitable contributions don’t usually surpass the standard deduction threshold? DAFs can be excellent generosity-maximizing tools in this case, too. Many of our donors decide to use a giving strategy called charitable bunching to maximize tax deductions and maximize what they are able to give. The 2022 standard deduction for married couples filing jointly is $25,900; for single individuals the standard deduction is $12,950. Therefore, taxpayers may only benefit from itemizing their tax deductions if their total deductible amount exceeds those figures. Taxpayers who donate significant amounts to charities each year but still find themselves slightly below the standard deduction threshold may want to consider bunching itemized deductions. Bunching deductions is, in short, contributing more than one year’s worth of charitable contributions in a single tax year. This is also known as charitable bunching, and it can help minimize your tax burden in the long run and maximize what you can give to charity. DAFs are a fantastic tool for a charitable bunching strategy. Since a contribution to a DAF at a DAF sponsor (like The Signatry) is a gift to an exempt nonprofit organization, a donation into a DAF is eligible for a tax deduction in the year you make the donation, even if the funds are not granted out in that same year. For example:  The Dilemma Scenario 1: Annual Charitable Giving  The Jones family give $8,000 to their church every year. In 2022, they also have $15,000 in other deductible expenses, bringing their total deductions to $23,000. 2022: $8,000 (charitable giving) + $15,000 (miscellaneous) = $23,000 deduction  2023: $8,000 (charitable giving) + $15,000 (miscellaneous) = $23,000 deduction  With a standard deduction of $25,900, it is smarter for them not to itemize. They will take the standard deduction in both years. The Solution Scenario 2: Bunching Charitable Deductions  The Jones family are able to increase their giving to $16,000 in 2022: They donate the usual $8,000 to their church and donate the remaining $8,000 into a DAF.  They can now itemize their tax deductions this year:  2022: $16,000 (charitable giving) + $15,000 (miscellaneous) = $31,000 deduction  Next year, they can recommend a grant through their DAF to support their church and still receive the $25,900 standard deduction. 2023: $0 (charitable giving) + $15,000 (miscellaneous) = $15,000 deduction  Bunching tax deductions—charitable gifts or other deductions—is one great way to expand your generosity. It can provide you with more flexibility and opportunity to give. Ask your financial advisor if this strategy could apply to your situation. 

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Advisor

Exploring Noncash Charitable Contributions with Clients

3 weeks ago By Jake Tometich

Since most American citizens’ wealth is held in non-cash assets, many of your clients may be interested in gifting these types of assets to their church or other nonprofit organization. Some nonprofits might not be equipped to facilitate such gifts, but this should not be an impediment to your client’s generosity goals. Navigating noncash charitable contributions is a specialty of The Signatry. Gifting complex assets provides your client the opportunity to use more of their resources to deepen their Kingdom impact. But with added complexity, gifting these assets requires extra planning and care. Our team can bridge the knowledge and experience gap. We can work with you and the donor to review issues such as timing, taxes, and potential risks and benefits to help determine if a complex, noncash charitable contribution is the right choice. When might a noncash charitable contribution make sense? Complex asset gifts are a natural by-product of major liquidity events you may be discussing with your clients and investors—especially C-suite executives, business owners, and entrepreneurs. The key is to complete the donation before your client sells the asset. Complex assets often have a low-cost basis, which can generate large capital gains and capital gains taxes. Gifting these assets can significantly lower (or eliminate entirely) capital gains taxes while providing income tax deductions on the fair market value of the asset. What steps are involved in preparing a noncash gift? To determine the fair market value of a complex asset, you and your client must arrange a qualified appraisal of the asset. There are restrictions on the timing of the appraisal relative to the potential gift, and the obligation to obtain the appraisal falls to the donor. The donor is also responsible for submitting an IRS Form 8283 with his or her tax return, which states the gift’s fair market value. The form must be signed by the appraiser, the organization receiving the gift, and the taxpayer. Every noncash charitable contribution looks different Because complex assets vary so much (from closely held business interests to real estate and more), the process for each asset gift differs. This is where our team can help. Please let us know if you would like to discuss any upcoming liquidity events or complex asset gift scenarios. You can also visit the Generosity Calculator on The Signatry’s website to explore the variables between traditionally selling a complex asset or gifting the non-cash asset to charity.

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Stewarding Resources to Accomplish More

4 weeks ago By The Signatry

A Commitment to Faith and Good Works   How do you ensure biblical stewardship of your resources? From the beginning of his career, Rogers Strickland aligned his business goals with his faith. After leaving the United States Air Force in 1980, Rogers founded Strickland Construction Company, Inc. in Raytown, Missouri. Mr. Strickland built his organization on the principles of strong customer service and quality work. He allowed his faith to guide him and was successful in growing his company from five team members to more than 50 employees. Mr. Strickland and his company recognized their blessings and wanted to guarantee good stewardship of the resources they were given by regularly giving back to the community and to the Kingdom. By providing all the material and labor, Strickland Construction Company has helped to build 55 community centers, churches, and schools in Haiti, the Dominican Republic, Sri Lanka, Brazil, Guatemala, and Jamaica.   In addition to his construction projects, Mr. Strickland owns several self-storage facilities around the Kansas City Metro area. When it came time to sell some of these properties, he wanted to make a Kingdom impact while serving both his business and his family. Mr. Strickland worked with The Signatry to steward the assets God had given him, by giving a portion of the LLC before the sale to his donor advised fund. “The Signatry made the whole process very easy,” said Mr. Strickland.     Understanding the Gifting Process   Donating a business interest is both a practical charitable giving strategy and a potential opportunity to save on taxes. When a business owner gives a portion of their closely held business interest, they may receive an immediate tax deduction and still maintain control over the remaining aspect of the business.     Before selling his self-storage facilities, Mr. Strickland worked with The Signatry to contribute a portion of the LLC. This helped Mr. Strickland save taxes and maximize his charitable gift. “It is so much easier to do a large transfer and have the option to give anonymous gifts. It takes the angst out of worrying about income tax and allows me to make numerous gifts in the future,” said Mr. Strickland.     Answering His Call   From the beginning, Mr. Strickland had a clear vision for who he wanted to serve and how he wanted his gift to help. “I wanted to support numerous charities that truly share the love of God and help them to get the resources they need!”   Thanks to Mr. Strickland’s generosity, stewardship of his resources, and his willingness to answer the call of God, he was able to serve his neighbors and his business well. Through this donation, Mr. Strickland had the benefit of:   Receiving a charitable income tax deduction Freeing up more money to go to charity Providing over $600,000 to the San Lucas Mission in San Lucas Toliman, Guatemala   The Role of The Signatry   The Signatry has years of experience in assisting individuals and companies as they desire to biblically steward their resources and give to charitable causes utilizing different types of assets. The Signatry team understands the gifting process and helps Christian business owners follow a path that will benefit their business while living out their faith. Making a complex asset donation can be a deeply personal decision and a multi-faceted process, so The Signatry works to serve and partner well with individuals as they go through each phase of the giving journey. The Signatry believes in the power of these gifts to solidify donors’ legacies of Christian stewardship.   “Working with The Signatry on this gift was a no-brainer. They helped me to share God’s resources in big chunks, sooner rather than later,” said Mr. Strickland.   Since 2000, The Signatry team has helped families, advisors, and ministries send more than $3 billion to charities across the globe. The Signatry empowers donors through creative giving solutions, biblically responsible investments, and legacy training. The Signatry facilitates revolutionary generosity through innovative approaches to the donor advised fund, including fee transparency, no monthly minimums, and full advisor access. The nationally acclaimed leaders of The Signatry help donors maximize their giving in ways that build and preserve generational wealth and legacy. 

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