Opportunities for Year-End Charitable Giving Revisited

We thought it would be worthwhile to remind our readers about opportunities for year-end charitable giving that allow tax deductions to be generated this year, but postpone the decision-making about actual charitable recipients for later years. Although charitable gifts can be made throughout the year, the end of the year is a popular time for donors to make final charitable giving decisions. This is mainly because it’s the last opportunity to generate an income tax deduction for the year through a charitable gift. But, it’s also because business affairs tend to slow down and donors of the greatest giving capability have time to reflect on more personal matters, which include fulfilling charitable objectives. Of course, in many cases, another factor is that it’s the only time of the year for many taxpayers to have a handle on the amount of surplus funds they have available for charitable giving after assessing their net income and expenditures for the year.

For people who have had a particularly high-income year (such as may be the case when a donor’s business has had a particularly successful year, or, perhaps, due to a scheduled Roth IRA conversion), it may be an ideal time to front-load gifts for future years. Such foresight allows a taxpayer to benefit in the current year from an income tax deduction attributable to the charitable contributions to be deployed further down the road. This can be accomplished in a number of ways—such as through a contribution to a donor-advised fund, a private foundation, a charitable remainder trust, a charitable lead trust or even a gift of a remainder interest in a house. In considering such potential gifts, donors should check with their tax advisers (or run the numbers themselves) to understand how the potential phaseout of their itemized deductions, based on a donor’s income tax bracket, as well as general adjusted gross income limitations for charitable contributions, might impact the charitable deduction available for 2014. To the extent a deduction for charitable contributions might be limited in any particular year, generally the nondeductible amount will be available for use over the next five years as a “carry forward” item.