Tax Time Again

I owe what in taxes?

Reeling from the sting of your 2016 tax bill?  Nothing can ruin a beautiful spring day like writing Internal Revenue Service in the “Pay to the Order of” section of a check.  Unfortunately, our time machine is still in development so we can’t go back to 2016 to right our wrongs, but moving forward, there is way to turn potential compulsory contributions to Uncle Sam into charitable gifts.

Let’s look at Michael & Katelyn Connor’s story. Last October, the Connors’ accountant contacted them to review their 2016 income tax picture.  With an adjusted gross income of $500,000, the Connors’ accountant estimated their income tax bill at $143,000 for the year.  He advised they could significantly reduce this liability by making a charitable contribution.

Their accountant wisely recommends they establish a donor-advised fund. By creating a DAF and transferring $100,000 of appreciated securities, the Connors avoid the realized capital gain tax of $12,000 on the sale of the securities.  They also realize a $100,000 income tax deduction on the gift which saves them nearly $40,000 in taxes.

By establishing the Connor Family Fund, Michael and Katelyn realize the tax savings immediately yet can delay recommending charitable grants from their account until future years.  Michael & Katelyn also will use their DAF to involve their children in the charitable decision making process.

Benjamin Franklin was right when he said that only death and taxes are inevitable.  However, with solid planning individuals can influence the destination of a portion of their dollars through charitable giving.

Contact us to find answers to any of your other charitable planning questions.

This blog content is the property of Ren and is made available for educational purposes as well as to provide a general understanding of different philanthropic strategies. Ren is not engaged in rendering legal, accounting or other professional services. If legal advice or other expertise is required, the services of a competent professional should be sought.

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