Tax Implications for Donors

"Jane" saved $12,000 in taxes by changing how she donated. Not how much. How. She was already giving $25,000 annually to her favorite charities. But she was doing it the expensive way. 𝗪𝗵𝗮𝘁 𝘀𝗵𝗲 𝘄𝗮𝘀 𝗱𝗼𝗶𝗻𝗴: → Writing checks from her bank account → Getting a basic charitable deduction → Missing bigger opportunities 𝗪𝗵𝗮𝘁 𝘄𝗲 𝗰𝗵𝗮𝗻𝗴𝗲𝗱: → Donated appreciated stock instead of cash → Avoided $5,000+ in capital gains taxes → Got the full $25,000 deduction → Used a donor-advised fund to bunch multiple years Same charitable impact. $12,000 more in her pocket. The principle: Don't donate for tax benefits. But don't ignore tax benefits when you're already donating. The government rewards charitable giving. Take advantage of what they allow. Example strategies to consider: - Donating appreciated stock, not cash - Bunch donations in high-income years - Use donor-advised funds for timing flexibility - Coordinate with other tax events Your generosity shouldn't cost more than it has to.

A common tax year-end question by philanthropic shareholders is, "Should I donate from my corporation or donate personally"? This is an excellent question, as perfect tax integration does not exist in Canada. These donors are looking for opportunities to maximize the amount of the gift to charities. To streamline this analysis, TTI has a new optimization objective in our flagship Salary vs Dividend worksheet. You can now compare the net after-tax cost of making a cash donation through the corporation, or optimizing an equivalent amount of corporate cash to the shareholder and donating an equal amount personally. An overview video is available here. https://lnkd.in/gE_hpZeM The calculation is comprehensive factoring in in complex elements such as the small business deduction threshold, GRIP, NERDTOH, ERDTOH, CDA, employer health taxes, CPP, EI, AMT, TOSI, marginal tax brackets, transfer payments (e.g. CCB), and much more. You can also get a head start on future planning as the new AMT calculations for 2024+ are already incorporated into all of TTI's Tax Planning solutions.

If you regularly give to charity, you should consider using a bunching strategy in 2024-2025. Consider this example where a family plans to give $16k to charity in 2024 and 2025. If they give $16k both years and have other itemized deductions of $14k, their annual itemized deduction would be $30k and their total itemized deduction for the two-year period would be $60k. Alternatively, if they give two years’ worth of charity in 2024 and then take the assumed standard deduction of $30k in 2025, their total deduction over the two-year period would be $76k. This would lead to an additional deduction of $16k over the two-year period. If those dollars would have otherwise been taxed at 24%, this represents a total federal tax savings of $3,840! Any state income tax savings would be in addition to this. Enjoy this bunching strategy while it lasts. As it currently stands, the standard deduction is due to decrease starting in 2026 and revert back to what it was before the Tax Cuts and Jobs Act. At that point, there probably won’t be as much opportunity for this kind of standard deduction arbitrage. If this strategy is appealing but you still want to give to your charity at a consistent rate throughout 2025, a Donor Advised Fund (DAF) can be useful. You would gift to the DAF during 2024 and receive the tax benefit at the time of making this contribution. You would then set up recurring transfers from your DAF to your charity of choice during 2025. --------------- This post is for general education and should not be taken as advice. Please consult with your accountant before implementing any tax strategies.

TAX-EFFICIENT GIVING FOR UK DONORS Whilst at Heaward Solutions we certainly aren't accountants, fundraising inevitably requires a degree of understanding of the tax system especially when this relates to tax on donations. This can be an effective strategy when talking to prospective donors but it's also one all too often underutilised in many fundraising campaigns. The key here is to highlight the opportunities for tax-efficient giving, especially how these can benefit both the donor and the recipient charity. For Individual Donors: 1. Gift Aid: Gift Aid remains one of the most straightforward ways to enhance individual donations. By declaring their donation under Gift Aid, UK taxpayers enable charities to claim an additional 25p for every £1 donated. Higher and additional rate taxpayers can also (personally) claim back the difference between the basic rate and their highest rate of tax, making their donations even more impactful. 2. Payroll Giving: Encouraging donors to participate in Payroll Giving schemes allows them to donate directly from their salary before tax is deducted. This means that the donation costs them less, and the charity receives more. It's a win-win situation, promoting regular, sustainable support for charities. 3. Gifts of Assets: Donors can contribute shares, land, or property directly to a charity, offering significant tax relief. By doing so, they can reduce their Capital Gains Tax liability and potentially benefit from Income Tax relief, making it a tax-efficient way to give larger sums. For Corporate Donors: 1. Corporation Tax Relief: Companies donating money to charity can deduct the value of their donations from their total business profits before tax is calculated. This not only reduces their tax bill but also demonstrates corporate social responsibility, enhancing their reputation and stakeholder relationships. 2. Donations of Goods and Services: Businesses can donate stock, equipment, or professional services, receiving tax relief equivalent to the cost of these goods or services. This form of in-kind support can be incredibly valuable to charities and is often overlooked. 3. Sponsorships and Partnerships: Collaborating with charities through sponsorship or partnership agreements can also be tax-efficient. These arrangements are treated as business expenses if they are reasonably linked to the company's trade, such as advertising the company’s involvement. By understanding these tax-efficient mechanisms, both individual and corporate donors can significantly enhance their contributions. To maximise the impact of these charities need to educate and engage with their donors about them. Not only does it maximise the funds available to your cause, but it also strengthens the bond between you and your supporters. For support with your fundraising contact @Heaward Solutions. #Philanthropy #Fundraising #Charity #TaxEfficientGiving #NotForProfit #Charity

Clarifying Tax Benefits on Donations: Understanding Section 80G Understanding tax benefits on donations can be a bit confusing, so I wanted to provide some clarification regarding Section 80G of the Income Tax Act. General Rule: Under Section 80G, 50% of the donations made to approved charitable institutions (like orphanages) are allowed as a deduction. In special cases (e.g., donations to the PM CARES Fund), you can get a 100% deduction. Important Note: The deduction applies to your net income, not your tax amount. Income tax is calculated on your net income after accounting for deductions. Example: Suppose your salary is Rs 10,00,000. You make a donation of Rs 1,00,000. Generally, tax would be calculated on Rs 10,00,000. However, with the benefit of Section 80G, your net income will be reduced by 50% of the donation amount (assuming it's a 50% deduction). So, your net income becomes Rs 9,50,000. Tax is then calculated on Rs 9,50,000. This means your taxable income is reduced, leading to a lower tax liability. Always remember to keep proper documentation of your donations to claim these benefits. Understanding how these deductions work can significantly impact your tax planning and overall financial health. #TaxBenefits #Donations #Section80G #IncomeTax #FinancialPlanning #TaxDeduction #Charity

𝗠𝗮𝘅𝗶𝗺𝗶𝘇𝗶𝗻𝗴 𝗧𝗮𝘅 𝗦𝗮𝘃𝗶𝗻𝗴𝘀 𝗧𝗵𝗿𝗼𝘂𝗴𝗵 𝗖𝗵𝗮𝗿𝗶𝘁𝗮𝗯𝗹𝗲 𝗚𝗶𝘃𝗶𝗻𝗴: 𝗔 𝗪𝗶𝗻-𝗪𝗶𝗻 𝗳𝗼𝗿 𝗬𝗼𝘂𝗿 𝗙𝗶𝗻𝗮𝗻𝗰𝗲𝘀 𝗮𝗻𝗱 𝗦𝗼𝗰𝗶𝗲𝘁𝘆 Charitable donations not only allow us to give back to causes we care about, but they can also offer significant tax advantages. Here are some key strategies to consider: 1. 𝗗𝗼𝗻𝗮𝘁𝗲 𝗔𝗽𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗲𝗱 𝗔𝘀𝘀𝗲𝘁𝘀: Avoid capital gains tax and deduct the fair market value. 2. 𝗨𝘀𝗲 𝗗𝗼𝗻𝗼𝗿-𝗔𝗱𝘃𝗶𝘀𝗲𝗱 𝗙𝘂𝗻𝗱𝘀: Get immediate tax benefits while deciding where to allocate your funds over time. 3. 𝗕𝘂𝗻𝗱𝗹𝗲 𝗗𝗼𝗻𝗮𝘁𝗶𝗼𝗻𝘀: Combine several years' worth of donations to maximize your deductions. 4. 𝗘𝘀𝘁𝗮𝗯𝗹𝗶𝘀𝗵 𝗖𝗵𝗮𝗿𝗶𝘁𝗮𝗯𝗹𝗲 𝗧𝗿𝘂𝘀𝘁𝘀: Consider Charitable Remainder Trusts (CRTs) or Charitable Lead Trusts (CLTs) for more complex tax planning. 5. 𝗣𝗹𝗮𝗻 𝗳𝗼𝗿 𝗘𝘀𝘁𝗮𝘁𝗲 𝗧𝗮𝘅𝗲𝘀: Charitable bequests can reduce your estate's taxable value. By strategically planning your charitable giving, you can maximize your impact while minimizing your tax burden. Always consult with a financial advisor to tailor these strategies to your unique situation.

Unlock the Secret Tax Benefits of Charitable Giving 🎁 "I donated to charity solely for the tax deduction!" — Said no true philanthropist ever. We give because we care. But let's be real: why not optimize your generosity and potentially reduce your tax burden? Here's a breakdown of what savvy donors understand about maximizing their impact: Understanding Eligible Donations: Qualified Organizations: Only donations to IRS-recognized 501(c)(3) organizations qualify for deductions. That heartfelt GoFundMe campaign? While admirable, it won't count for tax purposes. Non-Cash Contributions: Be aware that limits for non-cash donations (like clothing or goods) can vary based on the item's value. The Importance of Documentation: Keep detailed records! The IRS requires meticulous documentation of your contributions. Receipts, acknowledgments, and appraisals (for larger non-cash items) are crucial. Strategic Giving Considerations: Itemizing vs. Standard Deduction: Remember, you can only deduct charitable contributions if you itemize on Schedule A (Form 1040). For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your total itemized deductions don't exceed these amounts, itemizing might not be beneficial. Maximize Impact: You're already supporting causes you believe in. Strategic planning can help you amplify that impact while potentially reducing your tax liability. Are you planning to make a significant charitable contribution this year? Let's discuss strategies to optimize your giving and ensure you're taking advantage of available tax benefits.

Giving should be generous. But it should also be smart. I’ve seen clients donate significant amounts, without realizing how much more effective those gifts could’ve been with the right tax planning in place. Here’s the reality: The structure, timing, and method of your giving can dramatically impact your tax position. Give cash directly, and the benefit may be limited. Donate appreciated assets strategically, and you may avoid capital gains while still receiving a deduction. The same donation, handled differently, can produce very different outcomes. This isn’t about turning generosity into a tax game. It’s about making sure the money goes where it should: more to the causes that matter, less to the tax bill. The key is coordination. If your giving isn’t tied into your broader planning, it’s probably not being maximized. If you or your clients are planning to give, whether through a donor-advised fund, a large end-of-year gift, or something more structured, let’s connect. A small adjustment can make a big difference.