Gifts That May Reduce Your Taxes
Good Riddance 2020!
At Lollypop Farm, we’re grateful for friends like you. Your support betters the lives of animals and makes our mission possible. Now that 2021 has arrived, we’re looking forward to seeing many of you back in the building as soon as you are comfortable!
From a giving standpoint, there are several tax law provisions that may affect the tax deductibility of your gifts. In late December, Congress extended the non-itemizer’s charitable deduction of $300 – and even better – joint returns may now deduct up to $600 in charitable contributions, essentially doubling the benefit for those filing a joint return.
For those that itemize their tax returns, prior to 2020 taxpayers were limited to a deduction of 60% of their Adjusted Gross Income (AGI) for charitable gifts of cash. That limit was lifted for 2020 and has been extended through 2021. This effectively means a person could deduct ALL of their AGI by making gifts of cash to their favorite charities in both 2020 and 2021.
Finally, let’s note something that ended in 2020. Required Minimum Distributions from IRAs were suspended but are now required again. Starting in 2021, any Qualified Charitable Distributions from an IRA will again have the additional benefit of counting towards your RMD, which avoids creating taxable income for you.
There are a variety of ways to continue your compassionate support for Lollypop Farm that may help reduce income taxes, estate taxes and capital gains taxes.
Charitable Distribution from Your IRA
You can use your Required Minimum Distribution (RMD) to make a qualified charitable distribution (QCD) from your IRA directly to Lollypop Farm, so it does not create taxable income for you.
Here’s how it works:
- You must be 70 ½ years or older.
- An individual may transfer up to a total of $100,000 per year and a married couple may give up to $200,000.
- Your gift must be transferred directly from the IRA account to Lollypop Farm.
- Your gift is a transfer of funds from your IRA to Lollypop Farm, so it does not create taxable income for you and is not considered a charitable tax deduction.
- The transfer of funds counts towards your annual Required Minimum Distribution (RMD) from your IRA.
If you’re interested in this popular way to support Lollypop Farm, download our helpful resource, “How to Make a Charitable IRA Gift,” here.
Retirement plan gifts are a popular gift option for many Lollypop Farm supporters. Because retirement plans are taxed differently than most assets, they may actually become a tax liability.
Naming Lollypop Farm a beneficiary of your retirement account can be an attractive option for leaving a legacy and reducing income and possibly estate taxes for your loved ones.
Income taxes to your beneficiaries on retirement assets can be as high as 37%. This means, for example, that a $100,000 IRA will be worth only $63,000 when it gets to your loved ones.
Naming Lollypop Farm as a beneficiary of your retirement assets generates no income taxes. Lollypop Farm is tax exempt and eligible to receive the full amount, bypassing any income taxes. This means, for example, that a $100,000 IRA given to the Humane Society will be worth the full $100,000.
Contact your plan’s administrator to specify The Humane Society of Rochester and Monroe County PCA, Inc., as a beneficiary. Our Federal Tax ID Number is 16-0743047.
Life Insurance Plan
A gift of life insurance is an affordable way to secure tax savings during your lifetime while continuing your support for Lollypop Farm.
- You can give a significant gift from disposable income at a fraction of the value.
- Tax savings can be immediately realized.
- Your donation could reduce final taxes of your estate.
- Insurance gifts pass outside of the estate.
Gifts of Real Estate
When you transfer ownership of real estate to Lollypop Farm, you can reduce your taxes by deducting the appraised value of the property from your income tax liability and by avoiding capital gains tax liability. This kind of gift also removes the property from your estate and relieves you of any future management worries. If interested in this type of gift, please contact Cathie Wright at email@example.com to discuss further.
Gifts of Stock
By giving stocks, bonds, and mutual funds that have appreciated in value, you may receive a charitable income tax deduction for the full market value of the stock (up to a maximum of 30% of your adjusted gross income) and avoid paying the capital gains tax on any increase in the value of the stock. To receive instructions on how to easily transfer stock to Lollypop Farm, please call 585-295-5260 or email firstname.lastname@example.org.
For example, you give a gift of $5,000 in stock that you purchased for $500. You save $1,350 on your income taxes (if you’re in a 27% tax bracket), and you avoid paying capital gains tax on the $4,500 of appreciation.
If you have questions, please contact Cathie Wright, CFRE at 585-223-1330 ext. 245 or email@example.com.
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