October 24, 2024
10 Considerations for Your Year-End Giving
As the year draws to a close, many people reflect on their charitable giving. If you are planning to make year-end gifts in support of your favorite nonprofits, here are 10 things to keep in mind:
1. Your tax advisor is a critical part of your year-end giving process. Make sure you consult with your tax advisor before making any type of substantive year-end charitable gift. They can help you determine how your proposed gift might affect your estimated tax liability and your existing estate plan.
2. You can support your selected nonprofits while meeting your required minimum distribution amount using qualified charitable distributions (QCDs). If you are age 70 1/2 or older, you may receive QCD treatment for certain transfers of up to $105,000 from your IRA directly to a qualified nonprofit (or to a qualifying fund at that nonprofit). Transfers qualifying as QCDs are not included in your taxable income and reduce the balance of your retirement account (on which you and your heirs will ultimately pay tax). Any QCDs you make will also count towards your annual required minimum distribution. While contributions to a donor advised fund typically don’t qualify for QCD treatment, contributions to other types of funds at MCF (for example, nonprofit endowment funds, field of interest funds, donor designated funds, MCF’s Community Impact or Priority funds) may qualify.
NOTE: Before making a transfer from your IRA to a qualified nonprofit, be sure to confirm with your advisor that the transfer meets the requirements to be treated as a QCD. Certain transfers, such as those from an ongoing SEP or SIMPLE IRA, typically do not qualify as QCDs.
3. You can establish a charitable gift annuity (CGA) to provide a legacy gift to your selected nonprofit while receiving income during your lifetime. By establishing a CGA, you can make legacy gift to a nonprofit of your choice (or to a fund at MCF established to benefit that nonprofit) that is eligible for an immediate income tax deduction. Plus, you retain the right to receive quarterly or annual annuity payments throughout your lifetime. Any amount remaining in your CGA after your lifetime will be transferred to the organization or, if working through MCF, to a permanent fund you selected. (You can also establish a CGA to benefit MCF’s Priority Fund, Community Impact Fund or any of its field of interest funds.)
4. You can use QCDs from your individual retirement account to establish a CGA.The SECURE 2.0 Act allows you to make a one-time transfer of up to $53,000 in QCDs to a CGA. Take advantage of this new opportunity to create a CGA benefiting a nonprofit (or fund) of your choice while annuity rates remain relatively high.
NOTE: CGAs created using QCDs receive different tax treatment than CGAs funded with other assets. If you are considering this option, please make sure to consult with your tax advisor.
5. Donating assets other than cash may provide you with larger tax savings If you have stocks or other securities that are worth more than you paid for them, and you’ve owned them for at least 12 months, consider donating those instead of cash. Doing so may allow you to avoid capital gains tax and take a charitable deduction for the securities’ full fair market value (as opposed to what you paid for them). Your deduction for donations of appreciated stock or securities to public charities is typically limited to 30% of your adjusted gross income each year, but you can carry over any excess deductions for up to five additional years. Gifts of appreciated real estate may provide similar tax benefits.
NOTE: Since gifts of non-cash assets may take additional time to process, coordinate the gift with the recipient organization as soon as possible to ensure the transfer can be completed by year end.
6. By “bunching” your giving, you may be able to maximize the benefit of your itemized deductions, resulting in greater tax savings. The standard deductions for 2024 are $14,600 for single individuals and married couples filing separately, $21,900 for heads of household, and $29,200 for married couples filing jointly. Because these standard deduction amounts are relatively high, you may want to ask your advisor if bunching your charitable giving into the years you itemize your deductions would reduce your overall tax liability.
7. If you aren’t sure which nonprofits do the type of work you would like to support, contact a member of MCF’s Donor Engagement Team to discuss charitable giving options. Working with a philanthropic advisor at MCF gives you access to our knowledge of the local nonprofit community and opportunities to make a difference in ways that matter to you. You can reach a member of our Donor Engagement team at (608) 232-1763!
8. If you would like to do your own research on area nonprofits, visit MCF’s Greater Madison Nonprofit Directory. If you have an area of interest or ideas about a specific organization you’d like to support, MCF’s Greater Madison Nonprofit Directory can help. It provides a comprehensive online guide to charitable organizations in our region. You can sort broadly by area of interest, organization size or location. You also can use it to learn more about a specific organization’s financial health, programs, operations and impact.
9. If you would like to retain flexibility in the causes you support, consider establishing a donor-advised fund. If you are planning for a charitable tax deduction this year and want to retain the flexibility to distribute gifts to nonprofits later or over multiple years, a donor-advised fund may meet your needs. Find out more about establishing a donor-advised fund with MCF.
10. If the timing of your gift is important for tax planning purposes, make sure to be aware of the year-end giving deadlines. If you do choose to make a gift before year-end, timing is important. Mailed gifts must be postmarked by December 31, and any gifts made by credit card must appear on your credit card statement prior to December 31.
To allow adequate time to process transfers of stock and mutual fund shares, MCF recommends that you initiate these transfers by December 9.
To ensure distributions from your existing fund are sent to nonprofits in 2024, requests must be made no later than December 16.
Find the complete list of our year-end giving deadlines here.
Bonus Tip: If you need any information, or have any questions, about the options available for giving at MCF, contact us! We can also help you and your advisor think strategically about the tools you can use to make gifts during your lifetime or through your estate. You can reach our team at (608) 232-1763.