Dear District family,
As we approach 2013 and the highly publicized “fiscal cliff” for the US economy, I am reminded of the words of The Lord Jesus who said “Therefore do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For after all these things the Gentiles seek. For your heavenly Father knows that you need all these things. But seek first the kingdom of God and His righteousness, and all these things shall be added to you.” – Matthew 6:31-33
As you may have heard, there are some significant changes in the tax law on the horizon…but it is comforting to know that the kingdom principles that Jesus taught us never change and come with His divine guarantee!
We know that paying our fair share of taxes is biblical. Even Jesus paid the temple tax and taught us to “give to Caesar what is Caesars’ and to God what is Gods’.” Yet Psalm 112 also says that one who delights in the Lord will “manage his affairs with discretion.”
Here are some practical notes and tips for you and your congregation how to employ principles of good stewardship over the resources that God has entrusted to our care:
A payment by check is deductible in the year the check is mailed (postmarked before the end of day on December 31, 2012) or unconditionally hand-delivered to the charity, by that same date. If a large contribution is mailed on December 31, it is also advisable to use certified mail and retain the receipt as documentation that your contribution was made before the end of the year.
A great way to make sure your end-of-year donations make the cut-off is to utilize online giving. For business owners or investors expecting an influx of income in the first part of the year, electronic giving provides a great option to maximize your tax deductions this year for income anticipated in early January 2013
Donating stocks, bonds or other monetary instruments
Stocks, bonds, annuities and certain other financial instruments (owned for more than one year) can be donated directly to the church.
Investors desiring to make donations to the church, but stand to incur tax consequences for cashing out these investments, may benefit greatly by donating their stock directly and allowing the church to cash out the investment. Doing so provides the following benefits:
- The donor gets a tax deduction for 100% of the market value of the asset, and does not have to pay (the often hefty) capital gains tax on the appreciated value.
- The church gets to cash out the asset for the higher value and also does not pay taxes on it because of our non-profit status.
- These transfers are usually very east to execute and made simply by filling out a form.
For Pastors: If you need advice on how to facilitate receipt of a stock donation to your church, please contact me at the Southwest District Office (714) 985-9925 and I can walk you through a couple of options on how to process it.
Get a write off by donating straight from your IRA
IRA owners and beneficiaries who have reached age 70½ are permitted to make cash donations to IRS-approved public charities directly out of their IRAs. These donations are referred to as “qualified charitable distributions” and are federal-income-tax-free to you It is important to note that donors get no itemized charitable write-off on your tax return, but it’s OK because the tax-free treatment of qualified charitable distributions equates to an immediate 100% deduction without having to worry about restrictions that can delay itemized charitable write-offs.
If you are over the age of 70 ½ and think that a qualified charitable distribution might be the right approach for you, please consult with your tax preparer to confirm these benefits before making arrangements to have a distribution check made out in the name of the church.
Tax deductions for mileage when volunteering at church
People who volunteer their time at church (or with other charities) may deduct $0.14 per mile on their federal tax return for the mileage driven in their personal vehicle to and from church. The IRS still requires contemporaneous records (such as a mileage log) showing odometer readings, date of travel, charitable purpose etc. In many cases the IRS has accepted MapQuest printouts in lieu of odometer readings. This only applies to those who are serving as a volunteer on the date of travel and who are not compensated in any way by the church/charity.
Other planning tips for 2013
Looking ahead to 2013, there are a few tax increases on the horizon that will affect gift planning. In particular, the Bush tax cuts are scheduled to expire at the same time new tax increases and Medicare surtaxes are scheduled to take effect.
Donors in the higher income tax brackets will face some important planning decisions as 2012 closes. Consider the following possible strategies:
- Sell capital gain assets in 2012 rather than wait until 2013 in order to lock in the low 15% long-term capital gains tax rate.
- Make taxable gifts to a charitable lead trust in 2012 to lock in the $5,120,000 exemption and avoid the lower gift and estate tax exemption amounts scheduled to return in 2013. (Applications should be processed ASAP).
No matter what happens with economies, governments, laws or taxes we can rejoice in the knowledge that God’s kingdom continues to thrive. In the words of Paul the Apostle “now thanks be to God who always leads us in triumph in Christ, and through us diffuses the fragrance of His knowledge in every place.”
May God lead you triumphantly into 2013 and beyond!
Ric Guerra, MBA