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YEAR END GIFT GIVING AND CHARITABLE DONATIONS



I'm getting questions about gifts and donations.  Here's some tips to keep in mind


TAX FREE GIFT GIVING LIMIT...............You can give up to $17k to any person (not a charity) in 2023.  If you're married, your spouse can also give up to the same amount, meaning that the two of you can give anyone up to $34k annually.  You don't get a tax deduction for a gift to an individual, but the individual does not have to report it as taxable income.


MORE THAN $17K/34K?............ If you give more than the limit,  you would have me prepare a "gift tax return" declaring the excess.  There's no tax to pay, but IRS does require a reporting.  That tax return is due at the same time your annual income tax return is due (April 15 2024)


TUITION AND MEDICAL EXPENSES FOR AN INDIVIDUAL ........... Amounts paid directly to an educational institution (college/private school) or medical providers (hospitals/doctors) are not subject to the above 17k/34k limits.  Another way of putting this is if you pay someone else's tuition or medical bills directly (not reimbursing the person), there's no limit to how much you can pay


GIFTS TO YOUR SPOUSE...... Unlimited!


IRA REQUIRED MINIMUM DISTRIBUTION (RMD)............Up to $100k of distributions from your IRA can be donated to a qualified charitable organization.  Donations from your IRA count towards your annual RMD.  For example, if your annual RMD is $50k, and you donate $20k to a charity from the IRA, you only need to withdraw $30k paid to yourself and that will satisfy the annual RMD requirement.


DONATING STOCK.........If you donate stock to a charity,  you get a tax deduction for the current fair market value of the stock.  To qualify, had you sold the stock, it would have produced long term (not short term) capital gains.  Long term means you held it longer than a year.


DONOR ADVISED FUNDS......... Many of you have these.  DAF are tax deductible savings accounts intended to eventually be used to donate to a charity.   If you want to eventually donate funds to a charity but don't know which one to fund yet or how much, you can set up a DAF and get a tax deduction in 2023.  Then in a later year, direct the DAF to make a donation to your favorite charity.  (you don't get another deduction in the year the DAF makes the payment).  This is a great way to get a large deduction in the year you fund the DAF, without having to make a direct donation to the charity.


Hope this helps.  If you have questions, please let me know.

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