On Charitable Giving...

 

There are a number of advantages to donating to charitable organizations such as ours. Always remember to consult your trusted financial adviser when developing a contribution plan that best suits your personal circumstances.

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Idaho Education Tax Credit

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Donations to qualifying Idaho educational institutions such as LCHS are eligible for a 50% tax credit - a reduction in the actual tax you owe. If you itemize your taxes, a donation to LCHS will enable you to get income tax deductions on both your state and federal returns, plus a 50% Idaho income tax credit. Idaho individuals may take up to 50% of a gift of $1,000 (a tax credit of $500), while married couples may take up to 50% of a gift of $2,000 (a tax credit of $1,000). 

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An example - Married couple, filing jointly, eligible for itemized deductions and in the 35% marginal tax bracket.

• Gift to LCHS  --  $400

• Tax benefit from itemizing deductions  --  $140

• State tax credit  --  $200

• Net out of pocket cost of gift --  $60

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The PATH (Protecting Americans From Tax Hikes) Act of 2015

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The PATH Act of 2015 is a powerful incentive to charitable giving for some people. It allows one to transfer money from an IRA (Individual Retirement Account) directly to a charity. Ordinarily when money is withdrawn from an IRA it is taxable; in most cases the rate is 15%. If the money is transferred using the rules in PATH there is no tax. Putting it another way, there could be an opportunity to give an additional 15%. Not everyone can make use of PATH. You should seek professional advice when contemplating the use of PATH.

Here are some issues and rules for making a Qualifying Charitable Contribution to LCHS:

1. You must be planning on making a charitable contribution.

2. You must be planning on a contribution to LCHS.

3. You must have funds available from a Traditional IRA. The facility does not exist for some other programs like SEP and SIMPLE. Making a contribution from a Roth IRA is possible but has no noticeable tax advantage.

4. You must be over 70 1/2 years old when you make the contribution.

5. The contribution must be direct from the IRA trustee (custodian) to the charity "with no intervening possession or ownership by the IRA owner." This means that the check must be issued by the custodian directly to the charity, not to you. (You should be able to, if you wish, have the custodian send the check to you and you can then deliver it to the charity.)

6. The amount is limited to $100,000 per person.

 

People over 70 1/2 holding Traditional IRA's are also required to take a Required Minimum Distribution (RMD) from the IRA that depends upon age. The Qualifying Charitable Contribution can be applied to the RMD. Thus, if you are required to take a distribution it can be in the form of a charitable contribution. This means that you can perform a required action (the RMD) and donate to LCHS without paying tax on the distribution.

An example - Alice is 74 years old and has a Traditional IRA for which the Required Minimum Distribution for 2018 is $1000.  She could:

• Receive the $1000 and pay about $150 Federal tax, leaving $850 available, then donate $200 to LCHS leaving $650.

• Make a Qualifying Charitable Contribution to LCHS of $200 and receive $800, paying Federal tax of about $120 in Federal tax, leaving about $680.

• Make a Qualifying Charitable Contribution to LCHS of $234 and receive $766, paying Federal tax of about $115, leaving about $650.