This year gifting is being aided by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. Here are 3 gifting provisions that may work for you:
1. Qualified Charitable Distribution (QCD).
This year IRA owners and beneficiaries age 70½ or older can make a tax-free Qualified Charitable Distribution of otherwise taxable dollars from an IRA to a qualified charitable organization. QCDs are limited to $100,000 per year, per IRA owner or beneficiary, but they also satisfy your Required Minimum Distribution (RMD) up to $100,000.
2. Donation of appreciated stock.
The 0% capital gains rate on long-term investments has been extended for taxpayers in the 10% and 15% tax brackets. So, if you have adult children in these tax brackets you might consider gifting your appreciated stock. Your child can have taxable income up to $34,000 this year (or $68,000 if married and filing jointly) and not have to pay capital gains tax.
3. Increased gift exclusions.
The gift exclusion has been increased to $5 million for both 2011 and 2012. The estate rate is currently 35%. So, gifting assets today can potentially relieve your estate from needing down-the-road appreciation to cover future taxable events.Unless Congress acts, the gift exclusion will drop back to $1 million and the estate tax rate will increase to 55 percent on January 1, 2013.
These gifting strategies represent reasonable opportunities. If you act before December 31, 2011, you could receive sizeable tax relief for the 2011 tax year. At press time, these tax breaks were slated to end December 2012.
Please talk with your tax advisor before making any decisions. Our office can work with you and your tax advisor to create a gifting plan that fits your financial situation. In fact, we highly recommend that you coordinate your tax and investment planning processes.
