Gifting Discussion

As we end the year, we wanted to talk through the different ways you can make gifting part of your financial plan. At Ratio Wealth Group, we would like to discuss your planning to optimize annual gifts to charities and family members. To assist in framing the discussion as it pertains to your specific situation, please note the current guidelines as legislative changes and shifts do occur on an annual basis.

Gifts to Family:

Annual Gifting to any person: $16,000/year. (Married couples can give up to $32,000/year).

Gifts can exceed these limits, but these extra dollars count towards your lifetime gift exemptions, currently $12,060,000/person. Exceptions to the rules listed above allow you to pay for medical, dental, and tuition expenses directly to the institution. This is an imaginative way to pass funds for intended beneficiaries without touching your lifetime exemption.

Gifts to Charity:

The current tax benefit of a charitable gift is the annual standard deduction amount.
- Single filers may claim $12,950.
- Married couples filing jointly can claim a $25,900 standard deduction.
Annual income tax deduction limits for gifts to public charities, including donor-advised funds, are 60% of adjusted gross income (AGI) for contributions of cash.
For non-cash assets, the AGI value cannot exceed 30% and assets need to be held for more than one year (examples include fine art, cryptocurrency, equity compensation and real estate).
Contribution amounts more than these deduction limits may be carried over up to five subsequent tax years.

Additional Considerations:

Bunch two years of contributions. If your itemized deductions for 2022 are slightly lower than the standard deduction, consider “bunching” 2022 and 2023 charitable contributions into 2022. Itemize deductions on your 2022 tax returns, and then take the standard deduction on 2023 taxes.
Charitable donations from retirement accounts. Consider gifting from your IRA which can reduce your taxable income in future years, lower your taxable estate, and limit your beneficiaries’ tax liability.
– Qualified Charitable Distribution (QCD) of Individual Retirement Account (IRA) assets – If age 70 ½ or older, you can direct up to $100,000 per year tax-free from their IRAs to operating charities through QCDs.
– Charitable Deduction – If 59 ½ or older, use a charitable deduction to help offset the tax liability on a retirement account withdrawal or a Roth Conversion.
Establish and contribute to a charitable remainder trust or charitable lead trust. Setting up and funding a charitable trust is complicated. Let us know if you would like to explore this route. Donors should also consult tax and legal advisors.
Donor-advised funds. Consider opening a donor-advised fund (DAF) account where all contributions—of cash or non-cash assets are eligible for a tax deduction.
Ratio Wealth Group has partnered with two different DAF companies to find unique solutions for clients who want to bring their family into their charitable giving.
– Schwab: Our custodian Schwab has a great and low-cost DAF for all families who want to give at any capacity. You can track your gifts and start to see if your values are matching up with your giving.
– TIFIN Give: If you want a more sophisticated giving platform, TIFIN Give allows families to create a giving strategy across generations. TIFIN Give allows your family to each have a unique log in and allows you to give your children or grandchildren access to a giving budget. This is a good way to bring generations together in giving.

Disclosure

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