Many people take the time before the New Year to analyze their donations to non-profit organizations. There are several ways to maximize these gifts from an efficiency and tax standpoint to keep in mind. We also recommend planning year-round for any large donations in order for all opportunities to be considered to boost impact and tax deductions.
- Donor-Advised Fund – we’ve discussed these in detail in the past but want to make sure it’s always top of mind. If 2021 was a year of unusually high income, a donor-advised fund can help frontload future charitable giving as well as taking the deduction for taxes this year.
- Qualified Charitable Donation – for those old enough to withdraw required minimum distributions from IRA’s, a maximum of $100,000 can be given directly to a charity and the distribution will not be included in income for tax purposes.
- Cash vs. Stock – check with your financial advisor and accountant before deciding what to give.
- Cash – an individual can generally take a deduction up to 60% (but depends on certain factors) of adjusted gross income if made to a qualified charity. In 2021, the law allows taxpayers to apply up to 100% under specific circumstances.
- Stock – generally, donating appreciated securities are deductible up to 30% of AGI, but you don’t have to pay taxes on the capital gains.
- Charitable Trusts – For high-net-worth individuals and business owners, there is also a variety of charitable trusts that are available to be considered.
As mentioned before, we’re happy to help plan for gifts throughout the year but let us know if you’d like to discuss your strategy before year-end.
Matt and Andrew