End-of-year tax considerations
Money Matters by Keith Sessions, Chief Financial Officer
keithksessions@hotmail.com
I hope everyone had a great Halloween and that you are ready for the holidays. We will be finishing the last 2017 Executive Council meeting approximately the time you get this edition. This also marks the end of my fourth year on the council. It has been an honor to serve with some great modelers over the years. Although it is impossible to make everyone happy, we have been able to overcome adversity and increase the organization’s membership to record levels.
Ray Kroc, the man who built McDonald’s into a national franchise, said it best: “When you are green, you are growing. When you are ripe, you start to rot.” The AMA is definitely still green and growing. We need volunteers to do the work and contributions to fund it.
It often amazes me that so few people know about AMA’s Leader Member Program. Chances are if you are reading this, you are a Leader Member (or a relative). Please take a moment with our other members and introduce them to the program.
During this time of year, we also focus on the holidays and the end of another year. In my professional life, I spend many hours at the end of the year working with clients to reduce their tax bills. This often includes making an impact with causes that are important to them through charitable giving. The simplest way to make a contribution is with a check. This allows the charity to have immediate funds, and the donor often can often reduce his or her tax burden. Although it is simple, there are ways to amplify the donation.
Many large corporations will match contributions to a certain limit. Ask your human resources representative or manager if there is a foundation for charitable giving. Along with matching donations, many foundations will give outright grants to charities if they are asked. I have seen this as a very effective way to boost donations at fun-flys.
Another way to amplify your donation is to donate low-cost basis stock. Let’s say you bought a stock many years ago at $10 a share. Today it is trading at $200 a share. If you wanted to give $1,000 to a charity, you could sell five shares and send a check, except now you have $950 in capital gains. Even if they are long-term gains, federal taxes could reach almost $225. If you simply gave the five shares to the organization, you would still give $1,000. Your cost was only $50. The 501(c)(3) can sell the stock and is not subject to capital gains tax.
If you are older than 70½ years old, you are likely to have to take a required minimum distribution (RMD) from your IRA. For some people, their situation is such that they do not need the distribution for day-to-day expenses. In these cases, it adds to a tax burden and can even impact other income-related calculations. It is possible to gift straight from an IRA in place or by taking the RMD. This rule is often renewed close to the end of the year, so please check with your tax advisor.
Speaking of which, it is necessary that I remind everyone that this article and anything from the AMA cannot be used as tax advice. It is simply a general article of ideas to discuss with your advisor and how it would impact your situation. Also, while we all want to give to our local clubs, please remember that most are 501(c)(7) organizations and not 501(c)(3) groups. For a detailed article about this subject, please visit the AMA website.
These ideas work for most of our members. If you happen to be in the fortunate situation of having a taxable estate, there are additional, complicated strategies that could be more attractive to you and/or your heirs. Ask your advisor or send me a question if you would like to know more about those strategies.
