It’s been said, “You should be giving while you are living, so you’re knowing where it’s going.” Giving now allows you more say over how your gifts are handled, and you’ll get to experience the joy that comes with helping the causes you care for most. Gifts to charities made during your lifetime also provide significant tax advantages. Here are five pro tips to stretch your charitable dollar.
Pro tip #1: Don’t give cash.
Sure, it’s easiest to give by cash or check. But, cash gifts are not tax-wise gifts…almost any other asset is a smarter, tax-wise gift than cash! As you’ll see throughout this short article, it makes much more tax sense to give other, less obvious assets.
Pro tip #2: Use the federal income tax charitable deduction.
I once read a Forbesarticle where the journalist said she cringes at church, when the collection plate goes around. The reason? The columnist worries churchgoers who toss in cash aren’t keeping records, and so are losing money by not claiming the federal income tax charitable deduction.
I don’t go that far, I don’t cringe in church, but I do think we should all keep records of our charitable gifts. What information you have to keep, and may need to provide to the IRS, depends on the size of your gift.
Pro tip #3: Use appreciated assets.
Gifts of long-term capital assets can receive a double federal tax benefit. Long-term capital assets may include items such as stock, real estate, and farmland, or even artwork, or collections like stamps or coins. The first tax benefit was just discussed; donors can receive an immediate federal income tax charitable deduction, equal to the fair market value of the long-term capital asset. Second, assuming the donor owned the asset for more than one year, the donor can avoid long-term capital gain taxes which would have otherwise been owed if the asset was sold instead of donated.
Let’s look at a concrete example to make sure the first three pro tips are clear. Pat owns farmland and she want to give one acre. Let’s assume one acre has a fair market value of $1,000. She wants to use the farmland to help her favorite causes. Which would be better for Pat — to sell the farmland and donate the cash, or give the farmland directly to her favorite charities? Assume the farmland was originally purchased at $200 (basis), Pat’s income tax rate is 37%, and her capital gains tax rate is 20%.
NOTE: Above table is for illustrative purposes only. Only your own financial or tax advisor can advise in these matters.
Pat receives a double benefit; she gets a federal income tax charitable deduction equal to the fair market value of the asset, AND avoids paying capital gains tax.
Pro tip #4: Make gifts which are eligible for the Endow Iowa Tax Credit
Through the Endow Iowa Tax Credit Program, donors can receive a 25% state tax credit for gifts made during lifetime. Endow Iowa has three requirements to qualify. The first two requirements are simple, but the third requirement can be tougher to meet.
The gift must be given to, and receipted by, a community foundation. Opening a fund at your local community foundation is easy.
The gift must be made to an Iowa charity. If it’s a national charity, and not a statewide or local organization, you simply need to check if they have an Iowa arm, and many do. In other words, to get the Endow Iowa tax credit, you couldn’t give to Girl Scouts of America, while you could give to Girl Scouts of Greater Iowa. To get the Endow Iowa tax credit, you couldn’t give to National Public Radio, but you could give to Iowa Public Radio.
This third requirement is a bit more difficult than the first two. The Endow Iowa Tax Credit Program was designed to encourage endowments. Endowment means a permanent fund—something that will go on forever. So, to get the Endow Iowa tax credit, there is a limit on spending; you can only give out a maximum of 5% per year. This may, or may not, square with your charitable goals. Yet, for a tax credit of 25% off your gift, it’s something to seriously consider.
Endow Iowa Tax Credits are capped. The Iowa Legislature sets aside a pool of money for Endow Iowa, and it’s available on a first-come, first-served basis. Submitting an application at the beginning of the tax year is advised, as tax credits often run out toward year’s end. However, you can submit your application to be placed on the wait list for the next year’s tax credits.
Endow Iowa also has a cap for individuals and couples. Tax credits of 25% of the gifted amount are limited to $300,000 in tax credits per individual for a gift of $1.2 million, or $600,000 in tax credits per couple for a gift of $2.4 million (if both are Iowa taxpayers).
Pro tip #5: Combine Pro Tips #1-4 for dramatic tax savings.
Combine the first four pro tips! If you combine the first four pro tips, you can achieve dramatic tax savings. Let’s look again at the case of Pat and her donation of a long-term capital gain asset (her farmland) with the addition of the Endow Iowa Tax Credit. Check out Pat’s tax savings:
NOTE: Above table is for illustrative purposes only. Only your own financial or tax advisor can advise in these matters.
Pat gave her favorite charity $1,000 in the form of a long-term capital gain asset. After Pat combines the federal income tax charitable deduction, the capital gains tax savings, and the Endow Iowa Tax Credit, the out-of-pocket cost of that gift of $1,000 is less than $250. Because her gift was endowed, it will be invested by the local community foundation and presumably will grow. It will continue benefiting the charities Pat cares about, forever…talk about a legacy!
Remember, all individuals, families, businesses, and farms are unique and therefore have unique tax and legal issues. This article is presented for informational purposes only, not as tax advice or legal advice for an individual’s situation. If you would like to discuss how you can help the causes you’re passionate about, while also making smart tax decisions, don’t hesitate to reach out via email or phone (515-371-6077).
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/02/caley-dimmock-442468.jpg24953742Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2017-12-04 11:04:372020-05-18 11:28:56Give More & Pay Less in Taxes: 5 Pro Tips for Iowans
Sure, reading about succession planning for attorneys mandated by Iowa Court Rule 39.18 isn’t the most exciting news of the day, but it is certainly is important which is why you should scroll to page 8 of this month’s edition of The Iowa Lawyer. If you’re not an attorney, fear not. The article covers actions that are wise for all business owners and independent professional advisors to consider in their business succession planning. For example the advice that: “Having a detailed supplemental plan should bring you peace of mind, and also peace of mind to your family and your firm’s employees. A supplemental plan can show your clients you care to the utmost about their well-being.”
This article is the third in a series of four for the Iowa State Bar Association publication. You can find info on the first article, here and the second, on the eight simple steps for a successful business succession, here.
Click here or on the image below to read “Supplemental plan: Practical application of Iowa Court Rule 39.18.”
Questions? Comments? Feel the urge to get started on your much needed business succession plan? Feel free to contact me any time to discuss. I offer a one-hour free consultation, without any obligation. I can be reached any time at my email, gordon@gordonfischerlawfirm.com, or by phone at 515-371-6077.
Whatever you can do to a Buckeye—shellack, roast, soak, toast, chop, peel, finely ground, boil, crush, smash, cut, peel, and wait for it…a-salt—the Iowa Hawkeyes did last night in a stunning 55-24 rout of Ohio State. Iowa didn’t just beat the number three ranked team in the nation, they dominated the entire game from the very first play, and on both sides of the ball.
As the mission of Gordon Fischer Law Firm is to promote and maximize charitable giving in Iowa, I can’t help but think the smart and gritty play of the Hawks last night hold lessons for nonprofits too. Here are four:
Don’t Stop Believin’
If the Hawks went into the game without believing, truly believing, that they could win, well, it simply would have been a self-fulfilling prophecy. Whether you are trying to snag new donors, put into place some long-needed policies and procedures, get approval from the IRS to become a nonprofit – whatever your goal – you’ve got to start with a belief in yourself and your organization that you can match the mission to the moment.
Think Outside the Box
The Iowa Hawkeyes used two trick plays last night. There was a fake punt (from inside their own 20-yard line!) and also move called the Polecat Play. When facing a formidable opponent, or formidable goal, maybe the same-ole’, same ole’ won’t work. You may need to get creative.
Now, remember, for nonprofits, when you say, “think outside the box,” that box is essentially the IRS. So get good legal counsel to be sure you’re not being too creative and are in fact in full compliance with all laws and regs. But, the right kind of creativity is sometimes necessary when facing long odds.
Get Your Crowd into the Game
You need your fans for that extra juice—that extra bit of adrenaline. While you may not be able to fill Kinnick Stadium with supporters, you do have many folks who’ll help you in a wide variety of ways, and sometimes moral support and cheerleading is just what you need.
Take It One Play (Day) At a Time
The odds may seem insurmountable. For example, you’ve been trying to tackle the redo of your governing documents forever, and you just can’t ever seem to get there. Remember to take it a day/play at a time. Break it down.
Say you want to revise your general Independent Contractor Agreement, last looked at in the 1970s when Bob Commings was the Iowa Hawkeye football coach? Start with small steps. Something like this would be a good drill:
Distribute the aging document to the board of directors.
Explain why it needs updating.
Especially explain why your organization would work better with updated agreements, and/or what risks would be mitigated with updated agreements.
Form a committee to find competent counsel.
Hire a lawyer experienced in nonprofit law to look over and re draft.
Share the drafts back and forth between your lawyer and your committee until “perfect.”
Share the new Independent Contractor Agreement with the board of directors for final approval, and don’t forget to thank the board members who helped. And, be sure to celebrate reaching your goal!
Taking it one play at a time, suddenly revising major documents isn’t so overwhelming anymore.
I’d love to help coach your nonprofit to greater success. I offer a free one-hour consultation to anyone/everyone. Just email me at gordon@gordonfiscerlawfirm.com or call me on my cell at 515-371-6077. Together we’ll figure out a game plan that’s both sensible and affordable.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/11/20046692_1780255825325053_939097660741324803_n.jpg320960Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2017-11-05 17:41:522020-05-18 11:28:564 Lessons for Nonprofits From Iowa Hawkeye Win Over Over Ohio State
Give More & Pay Less in Taxes: 5 Pro Tips for Iowans
Charitable Giving, Taxes & FinanceIt’s been said, “You should be giving while you are living, so you’re knowing where it’s going.” Giving now allows you more say over how your gifts are handled, and you’ll get to experience the joy that comes with helping the causes you care for most. Gifts to charities made during your lifetime also provide significant tax advantages. Here are five pro tips to stretch your charitable dollar.
Pro tip #1: Don’t give cash.
Sure, it’s easiest to give by cash or check. But, cash gifts are not tax-wise gifts…almost any other asset is a smarter, tax-wise gift than cash! As you’ll see throughout this short article, it makes much more tax sense to give other, less obvious assets.
Pro tip #2: Use the federal income tax charitable deduction.
I once read a Forbes article where the journalist said she cringes at church, when the collection plate goes around. The reason? The columnist worries churchgoers who toss in cash aren’t keeping records, and so are losing money by not claiming the federal income tax charitable deduction.
I don’t go that far, I don’t cringe in church, but I do think we should all keep records of our charitable gifts. What information you have to keep, and may need to provide to the IRS, depends on the size of your gift.
Pro tip #3: Use appreciated assets.
Gifts of long-term capital assets can receive a double federal tax benefit. Long-term capital assets may include items such as stock, real estate, and farmland, or even artwork, or collections like stamps or coins. The first tax benefit was just discussed; donors can receive an immediate federal income tax charitable deduction, equal to the fair market value of the long-term capital asset. Second, assuming the donor owned the asset for more than one year, the donor can avoid long-term capital gain taxes which would have otherwise been owed if the asset was sold instead of donated.
https://www.gordonfischerlawfirm.com/gifts-of-long-term-versus-short-term-capital-gain-property/
Pop quiz!
Let’s look at a concrete example to make sure the first three pro tips are clear. Pat owns farmland and she want to give one acre. Let’s assume one acre has a fair market value of $1,000. She wants to use the farmland to help her favorite causes. Which would be better for Pat — to sell the farmland and donate the cash, or give the farmland directly to her favorite charities? Assume the farmland was originally purchased at $200 (basis), Pat’s income tax rate is 37%, and her capital gains tax rate is 20%.
NOTE: Above table is for illustrative purposes only. Only your own financial or tax advisor can advise in these matters.
Pat receives a double benefit; she gets a federal income tax charitable deduction equal to the fair market value of the asset, AND avoids paying capital gains tax.
Pro tip #4: Make gifts which are eligible for the Endow Iowa Tax Credit
Through the Endow Iowa Tax Credit Program, donors can receive a 25% state tax credit for gifts made during lifetime. Endow Iowa has three requirements to qualify. The first two requirements are simple, but the third requirement can be tougher to meet.
Endow Iowa Tax Credits are capped. The Iowa Legislature sets aside a pool of money for Endow Iowa, and it’s available on a first-come, first-served basis. Submitting an application at the beginning of the tax year is advised, as tax credits often run out toward year’s end. However, you can submit your application to be placed on the wait list for the next year’s tax credits.
Endow Iowa also has a cap for individuals and couples. Tax credits of 25% of the gifted amount are limited to $300,000 in tax credits per individual for a gift of $1.2 million, or $600,000 in tax credits per couple for a gift of $2.4 million (if both are Iowa taxpayers).
Pro tip #5: Combine Pro Tips #1-4 for dramatic tax savings.
Combine the first four pro tips! If you combine the first four pro tips, you can achieve dramatic tax savings. Let’s look again at the case of Pat and her donation of a long-term capital gain asset (her farmland) with the addition of the Endow Iowa Tax Credit. Check out Pat’s tax savings:
NOTE: Above table is for illustrative purposes only. Only your own financial or tax advisor can advise in these matters.
Pat gave her favorite charity $1,000 in the form of a long-term capital gain asset. After Pat combines the federal income tax charitable deduction, the capital gains tax savings, and the Endow Iowa Tax Credit, the out-of-pocket cost of that gift of $1,000 is less than $250. Because her gift was endowed, it will be invested by the local community foundation and presumably will grow. It will continue benefiting the charities Pat cares about, forever…talk about a legacy!
Let’s Talk
Remember, all individuals, families, businesses, and farms are unique and therefore have unique tax and legal issues. This article is presented for informational purposes only, not as tax advice or legal advice for an individual’s situation. If you would like to discuss how you can help the causes you’re passionate about, while also making smart tax decisions, don’t hesitate to reach out via email or phone (515-371-6077).
Read The Iowa Lawyer: Latest Article On Succession Planning
From Gordon's Desk..., NewsSure, reading about succession planning for attorneys mandated by Iowa Court Rule 39.18 isn’t the most exciting news of the day, but it is certainly is important which is why you should scroll to page 8 of this month’s edition of The Iowa Lawyer. If you’re not an attorney, fear not. The article covers actions that are wise for all business owners and independent professional advisors to consider in their business succession planning. For example the advice that: “Having a detailed supplemental plan should bring you peace of mind, and also peace of mind to your family and your firm’s employees. A supplemental plan can show your clients you care to the utmost about their well-being.”
This article is the third in a series of four for the Iowa State Bar Association publication. You can find info on the first article, here and the second, on the eight simple steps for a successful business succession, here.
Click here or on the image below to read “Supplemental plan: Practical application of Iowa Court Rule 39.18.”
Questions? Comments? Feel the urge to get started on your much needed business succession plan? Feel free to contact me any time to discuss. I offer a one-hour free consultation, without any obligation. I can be reached any time at my email, gordon@gordonfischerlawfirm.com, or by phone at 515-371-6077.
4 Lessons for Nonprofits From Iowa Hawkeye Win Over Over Ohio State
NonprofitsWhatever you can do to a Buckeye—shellack, roast, soak, toast, chop, peel, finely ground, boil, crush, smash, cut, peel, and wait for it…a-salt—the Iowa Hawkeyes did last night in a stunning 55-24 rout of Ohio State. Iowa didn’t just beat the number three ranked team in the nation, they dominated the entire game from the very first play, and on both sides of the ball.
This was an epic win. It will last forever in Iowa Hawkeye football lore.
As the mission of Gordon Fischer Law Firm is to promote and maximize charitable giving in Iowa, I can’t help but think the smart and gritty play of the Hawks last night hold lessons for nonprofits too. Here are four:
Don’t Stop Believin’
If the Hawks went into the game without believing, truly believing, that they could win, well, it simply would have been a self-fulfilling prophecy. Whether you are trying to snag new donors, put into place some long-needed policies and procedures, get approval from the IRS to become a nonprofit – whatever your goal – you’ve got to start with a belief in yourself and your organization that you can match the mission to the moment.
Think Outside the Box
The Iowa Hawkeyes used two trick plays last night. There was a fake punt (from inside their own 20-yard line!) and also move called the Polecat Play. When facing a formidable opponent, or formidable goal, maybe the same-ole’, same ole’ won’t work. You may need to get creative.
Now, remember, for nonprofits, when you say, “think outside the box,” that box is essentially the IRS. So get good legal counsel to be sure you’re not being too creative and are in fact in full compliance with all laws and regs. But, the right kind of creativity is sometimes necessary when facing long odds.
Get Your Crowd into the Game
You need your fans for that extra juice—that extra bit of adrenaline. While you may not be able to fill Kinnick Stadium with supporters, you do have many folks who’ll help you in a wide variety of ways, and sometimes moral support and cheerleading is just what you need.
Take It One Play (Day) At a Time
The odds may seem insurmountable. For example, you’ve been trying to tackle the redo of your governing documents forever, and you just can’t ever seem to get there. Remember to take it a day/play at a time. Break it down.
Say you want to revise your general Independent Contractor Agreement, last looked at in the 1970s when Bob Commings was the Iowa Hawkeye football coach? Start with small steps. Something like this would be a good drill:
Taking it one play at a time, suddenly revising major documents isn’t so overwhelming anymore.
I’d love to help coach your nonprofit to greater success. I offer a free one-hour consultation to anyone/everyone. Just email me at gordon@gordonfiscerlawfirm.com or call me on my cell at 515-371-6077. Together we’ll figure out a game plan that’s both sensible and affordable.