Are you looking to make some tax-smart gifts and donations this year?
You’ve worked hard to accumulate and protect your wealth this year. Now might be the time to consider tax-savvy ways to give some of it away.
Using the Annual Gift Tax Exclusion to Give Money to Family and Friends
To begin with, you might consider using the annual gift tax exclusion to give money to your family and friends in a tax-favored manner. Up to $14,000 can be given to any number of individuals per year without tapping into your lifetime federal estate tax exemption. The current lifetime exemption is a lofty $5,250,000, but making $14,000 gifts each year could help lower your taxes if your estate is eventually
valued above the exemption amount.
Investing Into A Students 529 College Savings Plan
Another way to provide for your family is investing in a student’s 529 college savings plan. Such contributions can provide for tax-free appreciation and withdrawals when used for qualified college expenses.
Looking for a Federal Income Tax Deduction?
If it’s a federal income tax deduction you’re after, however, your gifts will need to go to a qualified charity instead. Consider donating appreciated stocks or mutual fund shares owned for more than a year instead of donating cash. You will save on capital gains tax (which will be higher for many taxpayers in 2013) and receive a deduction equal to the market value of the security on the date of transfer.
Giving Away Assets Can Score You A Deduction
Gifts of other types of assets, such as real estate, jewelry, and artwork, can also score a deduction this year. Be aware that if the gift is valued over $5,000, a qualified appraisal will be required. And no matter the type of gift, if its value is $250 or more, a tax receipt from the charity is required before you can write it off.
Giving away your resources in a thoughtful and tax-smart way can be as difficult as accumulating them in the first place. For help in making these important and sensitive decisions, contact our office.