November 23, 2020
10 Tips for Year-End Giving
By David Koehler
As 2020 comes to a close, following are a few tips to keep in mind as you plan and direct your year-end giving to make a difference for our community and beyond.
1. Speak with your advisors. Before making any significant gifts to charity, consult with your CPA, attorney, or other advisors to learn about how your gift might affect your taxes and estate.
2. Consider these new tax deductions.
- If you take the standard deduction, in 2020 you can now also deduct $300 per household for gifts of cash to qualified charities (gifts to donor advised funds are excluded).
- If you itemize deductions in 2020, you may elect to deduct cash contributions up to 100% of your adjusted gross income (AGI). This is up from the prior limit of 60%, which still applies for gifts to donor advised funds. Gifts of appreciated securities continue to be limited to 30% of AGI.
3. Give from your IRA and reduce taxable income. Anyone who is 70.5 or older is eligible to transfer up to $100,000 from their Individual Retirement Account (IRA) directly to a qualified charity (donor advised funds are excluded). Ordinarily, such a qualified charitable distribution (QCD) counts toward your required minimum distribution (RMD), however RMDs are suspended for 2020. A QCD is not taxed and reduces the balance of your retirement account, which is otherwise subjected to income taxes for you or your heirs. This can be a great way to benefit from giving while also taking the standard deduction.
4. Benefit by giving appreciated securities. If you have stocks or other securities that are worth more than you paid for them (and you’ve owned them for a least one year) consider giving them to charity – you’ll avoid capital gains tax and receive a charitable deduction for the full market value of your asset. Such gifts are generally deductible up to 30% of your AGI and anything over that amount can be carried forward for up to five additional years. Appreciated real estate can be similarly advantageous to give to charity.
5. Time your giving for greater tax savings. Recent changes in tax laws (limiting deductions for state and local taxes to $10,000/increasing standard deductions to $12,400 for individuals and $24,800 for married couples filing jointly) may mean additional tax benefits for you. Consider doubling up on charitable giving and itemizing your deductions in one year, and then foregoing giving and taking the standard deduction in the following year. Over the two-year period, you may save considerably on taxes.
Read A “Bunch” of Tax Planning Ideas for a simple illustration and additional details on this smart strategy for giving.
6. Give now — decide later with a donor advised fund. If you are planning for a charitable tax deduction this year and want to distribute gifts to charities later or over multiple years, consider opening a donor advised fund with MCF, which can work great with the “double up” strategy outlined in #5.
7. Complete your giving before December 31. To qualify for a 2020 tax deduction:
- Mailed gifts must be postmarked by December 31 (even if cashed in the following year).
- Credit card gifts must appear on your credit card statement on or prior to December 31.
- Gifts of securities, QCDs, and real estate are more complex and may require two to four weeks to complete. Start the process early!
8. Make a distribution from your donor advised fund by December 15. If you already have a donor advised fund with MCF and want to ensure your approved distributions reach nonprofits near the end of 2020 or the beginning of 2021, please submit your recommendations to MCF by December 15.
9. Consider a gift in honor of a loved one while making an impact for our community in an area that is important to you or your honoree, such as the environment, learning, arts, women and girls, children and youth, the elderly and basic needs. Learn about current Donor Opportunities.
10. Plan your giving. 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 think strategically about the tools you use to give today or through your estate.
Bonus tip: Consult MCF’s Greater Madison Nonprofit Directory on our website for a comprehensive guide to charitable organizations in our region. Sort broadly by area of interest, organization size or location; learn about a specific organization’s financial health, programs, operations, and impact.
Need assistance? Give us a call! Whether you are an individual, family, nonprofit organization, corporation, neighboring community or professional advisor, we are here to help you meet your philanthropic goals, or those of your clients, today and in the future.