Charitable Giving Strategies – Charitable Planning Attorneys

Helping Reduce Your Taxable Income Through Charitable Contributions

If you have a high net worth and need to start planning the future of your estate, one goal should be to reduce your tax liability. After all, the taxes you owe throughout your life and even after your death can add up to a lot of money over time. If you’re interested in finding tax savings for your estate, talk to a lawyer about charitable giving options that allow you to earn a tax deduction while supporting a good cause.

When you come to Celaya Law for legal or tax advice, we’ll explain the charitable deduction rules and help you find the giving strategies that work for your financial situation. We understand that many people would rather direct their money toward a charitable cause they support than spend it on state or local taxes, so we’re happy to find ways to give while reducing your taxable income. Contact our Napa law office to learn about the tax benefits of charitable donations.

What Are the Benefits of Charitable Giving Strategies?

When you work hard to earn your money, watching it leave your account to cover taxes can be discouraging. But putting it to good use by giving it to qualifying public charities that help people can be heartwarming. That’s why you should consult a lawyer to find a charitable deduction strategy for your estate. 

Skilled lawyers can help you find a giving strategy that minimizes your current and future tax liability regarding estate, capital gains, and income taxes. Each strategy offers an immediate tax deduction on different taxes, depending on the donor’s specific tax situation and adjusted gross income (AGI). 

For instance, you can reduce the capital gains tax by donating appreciated non-cash assets to a charity. This can reduce the capital gains tax on assets, including everything from real estate and stocks to private business interests. When you donate appreciated assets, you’ll also save on income taxes through itemized deductions, as you can deduct the fair market value of your gift from the income tax you owe.

In addition, when you donate to a tax-exempt public charity, you’ll reduce your taxable income so you owe less on income taxes. This may be especially advisable during a tax year when you made more money than usual, as you can make several charitable donations and claim itemized deductions for each one to reduce your taxable income. 

Finally, you can use charitable contributions to reduce the value of your estate to avoid or reduce estate taxes. Depending on your net worth, your estate may owe these taxes when you pass away and your assets are transferred to your beneficiaries. So, if you can avoid this tax by making a charitable contribution, your loved ones will get more of your hard-earned money. Contact us for tax advice on charitable deductions.

How Do Charitable Giving Trusts Work?

One of the most popular ways to get a tax deduction for charitable gifts is to create a charitable giving trust. One variety is a charitable lead trust, which makes annual payments to a charity of your choice over several years. When the term ends, the payments will stop going toward the charity. They will instead go toward your beneficiaries without costing your estate any extra in gift or estate taxes. 

Another trust with tax benefits is a charitable remainder trust, which may be suitable if you want to reduce your capital gains tax liability when you sell your appreciated assets. When you transfer these assets to a charitable remainder annuity trust, you can set up monthly payments to yourself. You can also set up a portion of the money to be sent to a charity. So, if you want a steady income while making charitable contributions and saving on income and capital gains taxes, consider making a charitable remainder trust. 

What Are Other Charitable Giving Strategies?

A lawyer can help you find additional ways to enjoy a charitable deduction while paying less in income tax and capital gains tax. For example, you can start a private foundation to support a cause that’s important to you. This way, you can provide grants to charities or scholarships to individuals. This strategy lets you remain in control of your assets, but private foundations do require a board of directors or trustees to oversee them, so they can be complex and time-consuming to manage.

Another way to get a charitable deduction is to use the money in a pre-tax retirement account. This is because when you reach a certain age, you’ll be required to make minimum withdrawals from your account, referred to as a required minimum distribution (RMD). If you don’t need the money and want to avoid paying taxes on your retirement funds, you can use your RMD to make a charitable gift. This is called a qualified charitable distribution (QCD). 

Why Should You Hire Charitable Planning Lawyers Before Donating to Charity?

There are many ways to make charitable contributions while saving on taxes, so you should consult a professional for financial planning services before making any decisions. At Celaya Law, we’ve assisted numerous clients with finding the right ways to give cash donations and non-cash assets to the charities of their choice. You deserve to be rewarded with tax savings any time you give a charitable gift, so we’re here to help you navigate this process. 

We understand how confusing it can be to determine which private or public operating charities to donate to and how to do so. If you have questions about complex issues like researching fair market value or deciding if you should make a qualified charitable distribution (QCD) with your annual required minimum distribution, contact us for legal advice. Call our Napa office at 707-754-0977 to schedule a consultation with our team.