No Reason to Delay Charitable Giving with Extension of Tax Cuts

Schwab Charitable sees plenty of motivation for year-end giving

Friday, December 17, 2010 10:50 am PST

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SAN FRANCISCO

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NYSE:
SCHW
"It goes without saying that it is smart to discuss the matter first with tax and investment advisors."

SAN FRANCISCO--(BUSINESS WIRE)--Recent uncertainty around tax legislation has caused many Americans to delay their annual charitable contributions. But now that an agreement has been made to extend current tax cuts through 2012, donors should be kicking year-end 2010 charitable decision making into high gear, according to Schwab Charitable, one of the nation’s largest and fast growing donor-advised fund organizations.

The current tax bill approved by Congress maintains current income tax rates and the 15% rate for capital gains and dividends, introduces a lower estate tax of 35% (with a $5MM per individual exemption) and provides for an Alternative Minimum Tax (AMT) patch and a payroll tax cut for 2011. In addition, the plan calls for an extension of the tax provisions that expired in 2009, including the IRA charitable rollover, enabling those over 70 ½ to once again transfer money tax-free from an IRA directly to charity in lieu of taking taxable required minimum distributions. IRA distributions made before Feb. 1, 2011 will be treated as being made in 2010, but they are not allowed to donor-advised funds, supporting organizations, or private foundations.

“As stock market gains over the past few years have been healthy and this deal maintains current income and capital gains tax rates, we would encourage all Americans to follow through with their giving plans to meet charitable objectives and receive a tax deduction by the end of the year,” advises Kim Wright-Violich, President of Schwab Charitable.

In addition, she offers the following tips for consideration:

  • Open a donor-advised fund: For those in a hurry, donor-advised funds are a simple vehicle to secure last-minute charitable deductions now and decide exactly which charities to support later after the busy holiday season. You may open and fund a donor-advised fund with an irrevocable contribution of cash or securities by December 31st to receive a 2010 tax deduction. Donor-advised funds cost nothing to set up and can often be opened in one day.
  • Give appreciated stock: Donating appreciated stock that’s been held for more than a year to a public charity provides a two-fold benefit: the deduction is based on the appreciated fair market value of the stock and potential capital gains taxes are avoided.
  • Start stock transfers now: Securities transferred from a bank or brokerage account directly to a charity must be deposited into the charity’s brokerage account by Dec 31st to qualify for a tax deduction in 2010.
  • Keep track of cash contributions: Hang on to written receipts from the charity and bank records for cash gifts to claim a deduction. Always obtain a receipt from the charity for donations (cash and non-cash) of $250 or more. Cash contributions to public charities are deductible up to 50% of AGI, and excess contributions can be carried forward for five years.

Higher income individuals considering a Roth IRA conversion may also want to consider making a larger charitable gift this year to substantially reduce the taxes owed on their Roth IRA conversion.

“While there was some uncertainty this year, individuals still have plenty of time to make last-minute tax smart charitable contributions,” says Ms. Wright-Violich. “It goes without saying that it is smart to discuss the matter first with tax and investment advisors.”

Schwab Charitable recently introduced a new and improved website to assist individuals and their advisors to better understand the role that donor-advised funds can play in making it easier and more tax-effective to give to charities. As a leader in complex gift acceptance and the investment management of charitable funds, Schwab Charitable has become a clear choice for philanthropic individuals, as well as the larger investment advisors, wealth managers and family offices who serve them. In addition to the new website, the organization has introduced a number of popular innovations which have helped to drive its growth including Expanded Investment Options, a Private Foundation Conversion Service, Personalized Grant Letterhead and the Double Give microfinance guarantee program. This program, in collaboration with Grameen Foundation, has delivered $10 million in loan guarantees in its first phase, creating over 100,000 microloans in developing markets around the world.

About Schwab Charitable

Created as a national donor-advised fund with a mission to increase charitable giving nationwide, Schwab Charitable has raised over $4.7 billion and facilitated over $2 billion in grants to charity since inception. Donor-advised account sizes range from $5,000 to over $200 million. For more information, visit www.schwabcharitable.org.

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab Charitable recommends consultation with a qualified tax advisor, CPA, Financial Planner or Investment Manager.

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