What is Charitable Giving?
Charitable giving & investing in Canton, OH refers to giving goods, time, or money to an organization or individual. Some of these may be deductible, while others are not. According to the IRS, charitable giving is defined as the money donated by you to an organization in the form of goods, securities, or services. The market value of these items can be deductible on your income tax return only if the organization is qualified under the terms set by the IRS.
Charitable Giving is an excellent way for people to support a specific organization or cause that they care about. There are a number of different ways in which this could be accomplished. Such as, endowments, private foundations, charitable remainder trusts, and charitable annuity remainder trusts are just a few of the options to choose from when charitably giving.
Setting up a Charity in Canton, OH
If you have charitable aspirations, we would be glad to review your options with you in order to figure out how best to accomplish your goals. This may mean setting up a charity via a private foundation. Due to the potential tax benefit of giving to a charity, there are many regulations and rules that could potentially complicate the process. We can assist you with all of the paperwork involved, and we also have a network of professionals in place in order to help you with anything you may need that is outside our scope of expertise.
Operating a Private Foundation
How a charity operates is heavily dependent upon the desires of the individual setting up the private foundation. You have various options for the operations of the foundation. Below we have listed just a few:
- What is the yearly sum of distributions? How often will distributions be made?
- Will the charity raise money from outside donors? How will this be accomplished?
- How will the funds be invested?
- To whom will distributions be made to?
Based on your instructions, we can help you operate the foundation as well as use the funds as you have specified them to be used. Another item to consider is whether you want the recipient to know that the gift is coming from you or not. If you wish, you can maintain anonymity as we would work as the middle man between you and the recipient.
We will help you complete the IRS required filings and work alongside you to accomplish the goals that you have set for the charity.
Investing Charitable Dollars in Canton, Ohio
Funds can be invested to give the money an opportunity for growth in order to broaden the impact of money given to an organization. We can invest these funds with your time horizon and risk profile in mind to grow the account so that there can be more money sent to the specified recipient. Furthermore, due to inflation, having uninvested money set aside to be given at some point in the future is generally losing value. Instead, it is a better idea to invest this money as a more effective way of keeping pace with inflation. As a result, this gives the investment the opportunity for growth beyond the rate of inflation.
An endowment is when you give money to a nonprofit organization for a specific purpose. Typically, an endowment fund is structured in such a way for the principal to remain intact, while the interest earnings are to be used for a stated purpose. In this case, the transfer of money happens immediately.
Charitable Remainder Trusts
There are two similar, but slightly different kinds of charitable remainder trusts. A charitable remainder trust (CRT) is a gift of property or cash to an irrevocable trust. The gift is usually a highly appreciated asset that would otherwise be subject to substantial capital gains taxes. The asset can be sold inside the trust without the capital gain tax. From this trust, a donor can receive an income stream for a specified number of years, or for life. The named charity then receives whatever remains in the trust at the end of the trust term. The donor also receives an income tax charitable deduction when funding the charitable remainder trust. In summary, a CRT can help you avoid income tax on a highly appreciated asset, convert said asset to current income and receive a current charitable tax deduction. All this while benefiting your favorite charity.
Required Minimum Distribution to a Charity
Traditional IRA holders older than 72 must take a yearly required minimum distribution (RMD) from their account. In most instances, these withdrawals are taxable. An exception to this taxability is if the funds were transferred directly from the IRA to the qualified charity. When funds are transferred in this way, they are considered to be a qualified charitable distribution (QCD) and therefore do not increase your annual earned income. Keeping taxable income at a lower level could reduce your exposure to higher taxes in other areas such as the Medicare surtax and social security benefit taxes.
Benefits of Charitable Giving & Investing in Canton, Ohio
Many benefits come with starting and giving to a charity. It allows you to support a cause or organization that you value, helps those in need, and promotes generosity. In addition, it also has a positive financial impact for you. If you are donating to a charity that meets IRS requirements, you can actually write off your contributions on your taxes!
There are many nuances and guidelines to charitable giving & investing in Canton, OH, and we would be happy to help you sort out all the details to achieve your goals.
Get in touch with us at TTG Financial if you have charitable aspirations and want to find out how we can make this work for you!