Mission: to advance the health of the people of Wisconsin by supporting medical education and health initiatives.

Giving strategies adjust to tax law changes

Editor’s Note: The information on tax strategies has been provided by Robert Cummisford, CFA, of SVA Financial. SVA Financial serves as financial advisor for the Wisconsin Medical Society Foundation’s (Foundation) investments and is providing this information as a service to our supporters. It is for informational purposes only and not intended to constitute legal, tax or financial planning advice. A private financial advisor or other tax professional should be contacted for legal, tax or financial planning advice or answers to specific questions. The Foundation thanks SVA Financial for its ongoing support of the Foundation’s mission.

Since the tax law changes at the end of 2017, the Wisconsin Medical Society Foundation has seen an increase in donations made through donor-advised funds or through a qualified charitable distribution (QCD) made directly from an IRA.

The Tax Cuts and Jobs Act of 2017 raised the standard deduction limits used for income tax filing, making itemizing deductions less practical for many filers. Because of these changes, more donors are making gifts through their donor-advised fund (DAF). When asked why he chose to donate through a DAF, Bruce Campbell, MD, FACS, responded, “We believe in the Wisconsin Medical Society Foundation’s work that impacts health and supports physicians. Our donor-advised fund simplifies both the process of giving and our record keeping.”

Below are some strategies, including donor-advised funds, which allow filers to still itemize in some years or to realize tax benefits in other ways. You can still do well by doing good!

Combining Two Years of Charitable Donations
One recommended strategy is to combine two years of charitable deductions into one tax year. By making charitable contributions in January and December of the same year (think of the December contribution as paying one month in advance), taxpayers may be able to claim itemized deductions in the year of their charitable gifting and take a standard deduction in the alternate year. This merely changes the timing of the annual gifts.

Donor Advised Funds
Contributors to donor advised funds (DAF) receive a tax deduction in the year of contribution, while retaining control over the timing of the distribution to the charity of their choice. Essentially, this strategy is to again make single or multiple-year charitable gifts in one tax year, but this time via a DAF. For example, Doctors Jack & Diane Smith gift $25,000 of appreciated stock to a DAF and deduct this charitable contribution on their tax return. Then they can make distributions from their DAF to support the Wisconsin Medical Society Foundation, perhaps over the next several years.

Gifting Low Basis Stock
A common and efficient way to achieve charitable goals is to gift shares of appreciated securities from a taxable account. There are several ways to do this, and the Wisconsin Medical Society Foundation can easily facilitate these generous donations. Instead of gifting cash, contributing stocks, bonds or mutual funds purchased more than a year ago that have grown in value and would create capital gains if sold is an attractive tax savings opportunity. When these securities are gifted to a 501(c)(3) qualified charity such as the Wisconsin Medical Society Foundation, they are transferred in kind to the Foundation instead of being sold. The gift is made without generating tax consequences to the donor, and the Foundation still receives the same intended value. Not only do you save potential capital gains taxes, but you may also get a tax deduction for the full market value of the securities on the day of transfer (subject to certain limits).

Tap Your IRA
Another strategy is only available for taxpayers over age 70½ and involves making a qualified charitable distribution (QCD) directly from one’s IRA. A QCD counts towards the account holder’s required minimum distribution (RMD) but is not included in taxable income on the tax return. This strategy results in the taxpayer getting the benefit of the charitable contribution (through lower income) irrespective of whether they itemize deductions.

Estate Gifts
There are also a variety of estate planning strategies that could be used to achieve your gifting goals, such as making a bequest to the Foundation in your will or naming it as a beneficiary of your IRA or employer retirement plan. Schedule a conversation with a financial advisor and/or tax professional to discuss legal, tax or financial planning advice and get answers to questions relative to your specific situation.

Remember, if you name the Wisconsin Medical Society Foundation in any estate planning documents, be sure to contact the Foundation to be acknowledged as a member of the 1841 Society. Call Eileen Wilson at 608.442.3722 or complete and return the 1841 Society Enrollment Card.