5 Year-End Giving Tips
By Laura Malone
As Thanksgiving approaches, we all have things we are thankful for. Along with that gratitude, most of us probably cannot wait for 2020 to end. We are likely hoping 2021 is a much better year. However, before we close the door on this year, make sure you do not pass up these great ways to make a difference while giving you some added benefits.
1. CARES Act Charitable Benefits – You can deduct $300 of cash charitable gifts without itemizing. If you itemize, You can deduct up to 100% of your adjusted gross income using charitable gifts of cash. While donor advised funds are excluded, qualifying gifts can be made to other types of funds at the Community Foundation.
2. Donate Appreciated Securities. Donating appreciated securities from your investment portfolio creates TWO tax benefits. The tax deduction is the same size as a gift of cash if the investments have been owned for a year or more. You also avoid paying capital gains tax. PLUS, if you are “cash heavy” you can use that cash to repurchase those same investments at a higher basis. WIN, WIN, WIN!
3. Bunch Donations. If you itemize your deductions, you can combine multiple years of charitable contributions into one calendar year to maximize your tax benefit. Grants to support your favorite charities can be spread out over time, even in future years when you take the standard deduction.
4. Consult Your Professional Advisor About Your IRA. Just because IRA accounts have no required minimum distribution (RMD) in 2020, doesn’t mean those age 70½ or older can’t still make gifts directly from an IRA to a nonprofit up to $100,000. This gift donates pre-tax dollars. The earned income is never taxed because it goes directly to the nonprofit. If you are over 55 years old, but still under 70½, IRA withdrawals during this age create no penalties, but can be taxable. However, since this year cash gifts can be deducted up to 100% of income, itemizing deductions can help offset the tax impact from an IRA withdrawal.
5. Think About a Roth Conversion. Roth conversion moves money from a standard IRA into a Roth IRA. The benefit: all distributions from the Roth IRA are tax free. (Even distributions of future growth are tax free.) The downside: the money moved into the Roth IRA counts as immediate income. However, this year only, up to 100% of income can be offset by charitable deductions. This includes income created by a Roth conversion.
These are just a few ideas to discuss with your legal, financial, and/or tax advisors. They may not apply to your situation. Remember that all gifts need to be completed by December 31st to qualify as a 2020 charitable deduction. To learn more about how your gifts can make a lasting impact, contact Laura Malone, Development Officer, at 440.984.7390