As we finish with 2015 taxes, there’s a bit of good news to look forward to. At the end of last year, President Obama signed into law the impressive sounding “Protecting Americans from Tax Hikes” (PATH) Act, which extended many breaks. More importantly, though, PATH made 24 tax breaks permanent. This provides certainty going forward and opens up more possibilities, especially for philanthropic planning in 2016. Some of the provisions made permanent by PATH:
- The itemized deduction for state and local sales taxes, which is a big plus for residents of WA and other states with no income taxes.
- American Opportunity Tax Credit (up to $2,500 annually) for post-secondary education.
- Expanded charitable deductions for contributions of real estate for conservation.
- 529 College Savings Plan improvements, such as allowing computer costs to qualify.
- Deduction for educator out-of-pocket expenses ($250 annually).
- The Qualified Charitable Distribution (QCD).
The Qualified Charitable Distribution is especially helpful if you have maxed-out your tax advantage from regular charitable contributions due to limits on income or deductions. However, the QCD is only for people 70 ½ or older who donate up to $100,000 from their IRA to a charity (but NOT to a donor-advised fund). For them, such a distribution/gift provides two advantages: (1) It can be excluded from income that year; and (2) it also counts toward the annual required minimum distribution from retirement accounts.
Younger than 70 ½? There are numerous ways to give to charity in tax-advantaged ways, and we are happy to discuss those strategies with you.