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March 23, 2012 at 06:30 AM
After 25 years in practice, Susan Colpitts feels it’s too early to have any idea what the tax environment might be like in 2013.
“We all believe something big could be coming down the pike in terms of change for 2013,” Colpitts, executive vice president and co-founder of Signature, a multi-family office and wealth management firm in Norfolk, Va., said in a recent telephone interview for AdvisorOne’s Special Report, 22 Days of Tax Planning Advice for 2012.
“Some of the discussion involves itemized deduction changes, limiting charitable deductions to 28% deductibility, getting rid of other deductions. All bets are off in terms of what kinds of deals might be struck in this volatile political environment,” she said.
Still, her philanthropically minded clients need advice this year. Colpitts discussed some options available to them:
• “One of the old stalwarts, giving appreciated securities, still makes sense,” she said. A taxpayer can give the stock away to a nonprofit organization and avoid paying the capital gain on the stock; and since the charities are not taxable, they don’t have to pay the tax. “So, tried and true, we’ve been doing it for decades and it still works,” she said.
• Colpitts said that for a client whose effective tax rate has been 35%, it’s possible that in 2013 that tax benefit will be limited to 28%. “As we get to the end of the year and if it still looks like the winds are blowing in that direction, we might accelerate the charitable donation to 2012 in an environment where we still know what’s going on,” she said.
• An uneven tax year can be a good time to accelerate giving, Colpitts said. If a client’s adjusted gross income in 2012 spikes because of an IPO or some other event, and especially if there is enhanced liquidity, this year would be a good time to write a bigger check to a favorite charity or find some other tax-advantaged way to make a bigger contribution.
The alternative, if a client is new to philanthropy or doesn’t know which organizations to contribute to, is a donor-advised fund, which would allow time to figure out where to put donations.
