Josh Bryant, Attorney at Law
An article from the Tax Foundation reports that Arkansas ranked second in the country in charitable giving in 2016, despite being 48th in average income. Arkansans are as generous a people as you'll find. What if there were a way to give more while preserving and securing income? Here are a few tips from attorney Josh Bryant.
1. Make A Tax Plan
If the most effective people start with the end in mind, then being effective with your money in taxes requires you to have a plan. Plan on how much income you are going to get, how much tax you may have to pay, and then plan to give. Make it part of your routine to give money, especially from bonus checks, capital gains, and other funds that may be subject to higher income tax rates.
2. Establish a Charitable Lead Trust
Do you have an asset that you aren't going to need for a while, like a large CD or brokerage account? You can establish a Charitable Lead Trust for a specific term from which the income goes to the charity of your choice. You get the benefit of the charitable tax deductions while preserving the principal of the asset itself.
3. Establish a Charitable Remainder Trust
Do you have a piece of income producing property like a rental property or a farm that has grown in value but that you've had to depreciate over the years? A Charitable Remainder Trust is a great opportunity for you to continue to earn an income while giving property to the charity of your choice. You get a large tax deduction immediately, which varies depending on how long you retain an income interest in the trust. For that period, you continue to receive the income from the property, and at the end of the term the asset goes to that charity. You get the benefit of both the income tax deduction and the avoidance of capital gains when sold.
4. Establish a Private Foundation
You don't have to have a ton of money to establish a foundation. You can give you your foundation like you would give to any other charity. As long as you spend 5% of the foundation's assets every year for charitable purposes, you can write off everything you give to the foundation. In other words, you can get a $10,000.00 tax deduction but only spend $500 for charitable purposes. Think of it like a charitable savings account. This is a great way to teach your children about charitable giving and philanthropy.
You may just now be sitting down to do your 2018 taxes, but don't wait until this time next year to make a plan that securely, effectively, and efficiently puts you in a good tax position and makes the world a better place. Set up an appointment and let's get started. P.S. - I can help you prepare your taxes too.
Josh Bryant is an attorney, entrepreneur, pastor, and visionary with a heart to see churches, businesses, and families more secure, more effective, and more efficient in fulfilling their mission and bringing glory to God.