MSU Extension Explains Tax Saving Benefits
Montana State University Extension has revised a MontGuide that explains how charitable gift annuities could be used to meet both the philanthropic and tax savings goals of many Montanans.
“If you made a $10,000 gift to your favorite charity and received a tax credit that reduced your Montana income taxes by over $3,600, would you be interested?” said Wendy Wedum, MSU Pondera County Extension agent. “Keep in mind, a tax credit is a dollar-for-dollar reduction in the amount of actual income tax owed, while a tax deduction only reduces your taxable income.”
While other types of gifts are also eligible for the Montana Endowment Tax Credit, the most common is through charitable gift annuities. The METC encourages individuals to donate to endowments to support Montana charities and nonprofits that hold a 501(c)(3) designation, said Marsha Goetting, MSU Extension family economics specialist.
Examples of this designation are the Montana 4-H Foundation, the MSU Alumni Foundation and the Montana Community Foundation. Additional gifts qualifying for the METC include charitable remainder trusts, charitable lead trusts, pooled income funds, charitable life estates and paid-up life insurance policies.
“Such endowments will ultimately help assure sustainability for charities in our state,” Goetting said.
For individual and joint-filing taxpayers, the credit is equal to 40 percent of the charitable portion of the planned gift, Goetting and Wedum said. For individual taxpayers there is a $10,000 limit on the METC and a $20,000 limit for those filing jointly. The METC for businesses is calculated as 20 percent of the gift with a limit of $10,000. The METC for estates can be 40 percent for a planned gift or 20 percent for an outright gift with a limit of $10,000 annually.
More information about the METC can be found at https://store.msuextension. org/publications/FamilyFinancialManagement/ MT202012HR.pdf. For those who do not have computer access, copies are available from county Extension or reservation offices.
