Gifts and Trusts

Sources of Gifts

There are ways to be charitable that can also be better for you tax-wise, including:

Securities

Gifts of appreciated securities – donating stocks, bonds or mutual fund shares directly to a charity will save you from having to pay capital gains taxes – and if you’ve owned that donation for more than a year, you can deduct the full market value instead of just the amount you invested.

Couples & Gift Splitting

Married couples use gift splitting to double their gift tax exclusions, by making joint gifts to third parties. Here are a few basic rules:

The gift must be made to a third party
Both spouses must be U.S. citizens or residents
Spouses must be married to each other at the time the gift is made
If a gift is made jointly, then the spouses divorce that same year, they cannot remarry and still enjoy the tax benefits of gift splitting
Both spouses must agree to the gift splitting
The spouse who makes the gift cannot give their consenting spouse power of appointment over the gift

Generally, once a couple elects to gift-split during the year, all successive gifts that year must also be split.

Also, for GST tax purposes, if gift splitting is elected for the tax year, the deemed allocation rules for the GST exemption will be applied equally to each spouse unless both spouses file a gift tax return that allocates the exemption differently.

IRAs

Give from an IRA – if you’re 70 ½ or older and haven’t taken your required minimum distribution from an IRA, you can do an IRA charitable rollover (up to $100,000), which saves you from having to pay income taxes on a RMD.

Community Gifts

Give to a community fund – according to the Council on Foundations, California has 71 community funds that accept donations. Giving to a community fund can result in both state and federal tax savings.

Gift Payment Methods

Charge it – if you’re cash-strapped during the holidays, you can still donate via credit card and pay it off in January. The IRS allows you to take the deduction in December when the donation is made, rather than when it is paid.