Thursday, September 19, 2013

Year End Tax Planning for Charitable Contributions

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Charitable contributions need to be properly timed to obtain the maximum tax benefits. If you plan to make a charitable contribution in 2013 or 2014, you should consider making the contribution in 2013 if you will be in a higher marginal tax bracket in 2013 than in 2014.  On the other hand, if you expect to be in a higher bracket in 2014, you should consider deferring the contribution until next year.  You should also be aware that the special tax provision for direct contributions out of individual retirement accounts expires at the end of this year.

When making any significant charitable contribution, you should try to contribute appreciated long term capital gain property (property held over 12 months).  That way, your charitable deduction for contributions of real estate or securities is based on the full appreciated value of the property, while you avoid paying any tax on the appreciation in value.  Do note that, for contributions of tangible personal property (such as automobiles), the donation may be limited to your basis in the property unless the donated item is related to the exempt purpose of the charity.  Also note that contributions of appreciated capital gain property generally are subject to the 30% of adjusted gross income annual deduction limit rather than the standard 50% annual deduction limit.

If you plan to use IRA distributions to make charitable contributions, you should be aware that this favorable tax provision is set to expire at the end of this year. Under this provision, taxpayers who are age 70 1/2 or older may take exclude from income up to $100,000 of amounts that would otherwise be taxable IRA distributions. Further, these IRA distributions are not subject to the normal charitable contribution percentage limits.  Unless this special tax provision is extended, this may be your last opportunity to achieve these tax savings.

If you would like to discuss getting the maximum tax benefit from the charitable contributions you intend to make, please call me at 937-223-1130 or

AND ONE MORE THING.  A friend and client, Rand Oliver, is working on his doctoral dissertation.  The subject matter is "Small Business Succession Planning in Southwest Ohio".  Past research strongly indicate that small business leaders identified succession planning as the most significant organizational leadership challenge they faced.  Randy would like to participate in a research study that assesses the relationship between a business owner and his or her likely successor.  There are 50 questions taking approximately 15 minutes of your time.  You and your likely successor must BOTH fill out the questionnaire.  All information will be kept confidential.  Your results will be part of statistics and you will receive a copy of the finished product to hopefully help you in your future succession planning.  If you are interested, please contact me at 937-223-1130 or  You can also contact Randy directly at 937-271-7282.

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