by Josh Bryant
By now, many are realizing that it is much harder to itemize on their tax returns. That's because in 2017 Congress passed the Tax Cuts and Jobs Act, which raised the standard deduction to levels which many people will no longer reach. That can be both good and bad. However, a bigger deduction leads to lower taxes, and we're all about doing what we can to lower taxes and do good. Here are three things you need to know about how a private foundation can help you do good and lower taxes.
1. Maximize Your Tax Deduction
A private foundation can be a great way to maximize your tax deduction. If you run all charitable giving through your foundation and are keeping good enough records, you'll never have to wonder whether you've given enough at the end of the year to maximize your tax deductions. You can make a contribution to your foundation on December 31 and it count towards that year's tax return. What's more, a private foundation does not have to pay out all of its contributions. It only has to pay out 5% of its assets every year, which means you can invest the rest and grow your charitable impact over time. On top of that, the formerly exorbitant fee necessary to start a private foundation with the IRS has gone down significantly. Most people will only pay $225 instead of the $800 or more that the fee used to be.
2. Maximize Your Impact
As hinted to in paragraph 1, you can really maximize your charitable impact over time by not giving away all of the money you give to your foundation. You can invest up to 95% of the foundation's total assets. Early on you'll probably want to pay out quite a bit more than that, but that's ok. Even if you saved $5,000 per year and invested it at a modest 6% return for 30-years, you'd have almost $450,000 that you could give away and make a bigger impact than had you just spent the $150,000 that you had saved. You can triple your impact! As you get older, you can save more than $5,000 per year and do even more good.
3. Leave a Charitable Legacy
Often times, estate planners and development officers talk about a charitable legacy in terms of a charitable remainder trust, charitable lead trust, will, or other estate planning document. A charitable foundation is another way of doing that, but in an even broader sense. Not only could you leave a large sum of money to charity, you could leave control of the foundation to your children. You can involve them in the decision making process of giving money. You can teach them philanthropy, and then they can do the same for their kids. In three or four generations, you could have started a legacy that gives millions of dollars to charitable causes around the world. That's a legacy!
Josh Bryant has worked in churches and non-profits for most of his life as either a volunteer, board member, staff member, donor, and more. He loves helping people create something that does good in the world. Josh Bryant would love to help you start your legacy of philanthropy. Call Josh to establish your family foundation today.
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.