November 17, 2021

10 Things to Remember About Year-End Giving

By Alison Helland

Alison Helland photo

It is hard to believe, but 2021 is quickly drawing to a close! At this time of year, many people start thinking about the types of charitable gifts they would like to make before year-end.

As you prepare for your year-end giving, here are 10 things to remember:

1. Your advisor is a critical part of your year-end giving process. Before making any type of substantive year-end charitable gift, consult with your tax advisor. They can help you determine how your proposed gift might affect your estimated tax liability and your existing estate plan.

2. Certain charitable giving deductions have been extended into 2021.

  • Taxpayers taking the standard deduction may claim an additional charitable deduction of up to $300 for individuals and $600 for married taxpayers filing jointly for cash gifts to qualified charities. (Note, however, that gifts to donor advised funds are ineligible for this additional deduction.)
  • Taxpayers itemizing their deductions may be able to deduct cash contributions equal to up to 100% of their adjusted gross income (AGI). (Deductions for certain gifts, such appreciated securities held for more than 12 months, continue to be limited to 30% of AGI.)

3. Qualified charitable distributions (QCDs) from your individual retirement account (IRA) are still tax-free. Anyone who is 70 1/2 or older can transfer up to $100,000 from their IRA directly to a qualified charity. (A donor advised fund does not qualify to receive QCDs). A QCD is not taxed and reduces the balance of your retirement account (on which you and your heirs will ultimately pay tax). Your QCD can be sent directly from your IRA to your favorite nonprofit . It also can be used to establish or add to an endowment fund designated to benefit the organization of your choice, or to support one or more of MCF’s funds, which target grantmaking throughout Dane County.

4. Giving appreciated securities may provide an increased tax deduction. If you have stocks or other securities that are worth more than you paid for them, and you’ve owned them for a least 12 months, consider giving those to charity. Doing so may allow you to avoid capital gains tax and take a charitable deduction for the securities’ full fair market value. Your deduction for donation of appreciated stock or securities is limited to 30% of your AGI each year, but you can carry over any excess deductions for up to five additional years.

NOTE: Since gifts of appreciated securities can take some time to process, you will want to coordinate with the recipient of your donated securities as soon as possible to ensure that transfer of these securities can be completed by year end.

5. Giving appreciated real estate may also provide an increased tax deduction. Giving appreciated real estate to charity can provide a tax benefit similar to a transfer of appreciated stocks or other securities. However, like stock gifts, real estate transfers can take some time to complete, so planning ahead is important.

NOTE: If you are interested in making a gift of real estate to charity, you should coordinate with the recipient organization as soon as possible to confirm it will accept the property, and to complete the process necessary to transfer the property by year-end.

6. “Bunching ” your giving to maximize the benefit of your itemized deductions may result in greater tax savings. The standard deductions for 2021 are $12,550 for individuals and married taxpayers filing separately, $18,800 for heads of household, and $25,100 for married individuals 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.

You can find more information on how the timing of your gifts may affect your overall tax liability here.

7. Take time to learn about the organizations working in areas you’d like to support. If you have an area of interest rather than 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.

8. If you want 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 charities later or over multiple years, consider establishing a donor-advised fund. You can find out more about establishing a donor-advised fund with MCF here.

9. If you need any information, or have any questions, about the options available for giving at MCF, contact us! 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. 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.

10. Be aware of the year-end giving deadlines. Last on our list, but certainly not least important – 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 time to process the transactions, MCF recommends that transfers of stock and securities be completed no later than December 7. And distribution requests from existing MCF funds must be made no later than December 15. You can find the complete list of year-end giving deadlines here.

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