We want to remind you to make any annual exclusion gifts before the end of the year. In 2016, each individual can give up to $14,000 to an unlimited number of donees, without incurring any gift tax liability or using any of his or her lifetime exemption from estate, gift and generation-skipping transfer taxes. You may want to consider gifts from you and your spouse to each of your children and grandchildren and to any other individuals to whom you wish to make a gift. The check must be deposited by the donee before the end of the year.
This exclusion is available each year but does not carry over if it is not used in a particular year. To qualify, the gift must be of a “present interest,” so the gift should either be a direct cash gift or, if made in trust, it must be to a trust with a “Crummey” provision, and a notification letter should generally be sent to the beneficiary. Trusts for grandchildren must be designed to qualify for the generation-skipping transfer tax exemption annual exclusion.
If you are age 70 ½ or older, you also can make an annual rollover gift of up to $100,000 to a charity directly from your Individual Retirement Account. You do not receive a tax deduction; however, you also do not have to include the amount rolled over to the charity in your taxable income. This is an efficient way to make a charitable gift because it is not subject to the phase-out provisions that apply to itemized deductions on your tax return. A further benefit of a charitable rollover is that it counts against the minimum distribution amount you are otherwise required to withdraw.
This is also an annual opportunity that does not carry over if it is not used in a particular year. The provision allowing rollovers from IRA accounts was originally enacted as a temporary provision, but was made permanent by Congress last year. The gift cannot be made to a donor advised fund, a supporting organization, or a private foundation.
Although the tax law in 2017 is uncertain, two proposals that have been raised would decrease the benefit of a charitable contribution: (1) a lower income tax rate; and (2) a cap on miscellaneous itemized deductions. Consider whether you can use a charitable deduction in 2016. If you can, identify appreciated assets to contribute and obtain the deduction without recognizing income. And most important, be sure to get a receipt from the charity – without it, there is no deduction.