Overman Capital - Your Guide to Year-End Charitable Giving

Whatever your reason for giving this year, it’s essential to know how your charitable contributions can impact your financial plan. Being strategic and intentional with your charitable contributions can create tax benefits for you and your chosen charity.

Here are our suggestions.

Research Charitable Organizations

Select reputable and transparent organizations to maximize the impact your monetary donation can have. A qualified charity will have 501(c)(3) status, indicating it’s federally recognized as a non-profit organization.

Third-party websites like Charity Navigator, Charity Watch, and Give Well offer unbiased, independent ratings and evaluations of charitable organizations. These sites can provide important insights into how donated money is distributed. If you’re considering making a sizeable donation, we recommend you speak directly with the chosen charity to discuss how they can utilize the gift. 

If you haven’t already, check with your employer about what opportunities they provide concerning charitable giving. For example, some employers will match employee donations to specific organizations.

Consider Itemizing Your Deductions

To deduct charitable donations, you must itemize them on an IRS Schedule A form.¹ To do this, you’ll need to keep track of each donation made to a charitable organization throughout the year. Usually, the charity can provide you with a form to document your contribution. If the charity does not have such a form handy (and some do not), you may be able to use other forms of proof, including:

• Receipts
• Credit or debit card statements
• Bank statements
• Canceled checks 

When reporting deductions, the IRS may want to know a few essential details, such as the name of the charity, the gifted amount, and the date of your gift.

Remember, itemized deductions may only have tax benefits when they exceed the standard income tax deduction, so check on the standard deduction amount for your tax filing status.

Make Non-Cash Donations

Many charities welcome non-cash donations. Donating an appreciated asset can be a tax-savvy move. 

For example, you may wish to consider gifting highly appreciated securities. Since selling securities can lead to a taxable event, transferring appreciated securities directly to your charity of choice may be wiser.

This transfer can accomplish three things:²

• You can manage paying the tax you usually pay upon selling the shares.
• You may be able to take a current-year tax deduction for the full fair market value of the shares.
• The charity gets the full value of the shares, not their after-tax net value.

Utilize Your Life Insurance Policy

Do you have a life insurance policy? If you make an irrevocable gift of that policy to a qualified charity, you can get a current-year income tax deduction. If you keep paying the policy premiums, each payment may become a deductible charitable donation - although deduction limits may apply.³

If you continue to pay premiums after the gift, that could reduce the size of your taxable estate. In any case, you can transfer the death benefit out of your taxable estate. 

It will help if you consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments. Several factors will affect the cost and availability of life insurance, including age, health, type, and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications.

Whatever your situation, getting advice from a tax professional or financial professionals, like Overman Capital Management, can help you give wisely as the year closes. If charitable giving is an integral part of your financial plan, it’s crucial to ensure you get the most value out of each donation. Overman Capital is here to help. Connect with us online, give us a call at (252) 635-6666, or stop by the office in historic downtown New Bern, NC, to learn more.