Year-end Strategies for Charitable Giving
As we approach the end of the year, please consider these tax-savvy ways to make your giving go further.
The increase to 100% AGI for certain charitable deductions –Under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), in 2020 donors can deduct up to 100% of their adjusted gross income (AGI) for certain gifts of cash, which is a one-time increase from the 60% cap. This benefit is not available for contributions to private foundations or donor-advised funds, so operating charities like yours are well positioned to leverage this benefit.
Gifts of appreciated securities–For donors who have unrealized appreciation in long-term equity holdings, an outright charitable gift of those securities may be appropriate. These donors can deduct the full market value of the securities as a charitable donation and avoid the long-term capital gains tax, subject to certain limits. Consider targeting donors who may have significant long-term positions in technology and other industries that have performed particularly well in the current environment.
Qualified charitable distributions from IRAs –Donors who are 70½ years or older at the time of transfer can exclude from their taxable income up to $100,000 annually in qualified charitable distributions (QCDs) from Individual Retirement Accounts (IRAs). QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met. This benefit is not available for contributions to private foundations or donor-advised funds, so operating charities like yours are well positioned to leverage this benefit.
Gifts of complex assets –Given market volatility and uncertainty for certain businesses this year, some donors may be less able or willing to make gifts of cash or marketable securities. For these individuals, a preferred option may be gifts of other assets including real estate, closely-held business interests, art, and other complex assets that have low-cost bases. In some instances, the donor will be able to deduct these assets at fair market value without paying tax on the appreciation in value. (Note: You may want to confirm what types of assets are permissible according to your organization’s Gift Acceptance Policy.)
Distributions from donor-advised funds –Donor-advised funds (DAFs) have fueled charitable giving with assets in these funds passing the $121B mark in 2019, up from $110.0 billion in 2017. This explosive growth presents an opportunity for public charities to benefit from this pool of assets. Accessing DAF donors can be complicated by the ability for donors to remain anonymous, so due diligence and data analysis are critical to understand the opportunity. Utilize testimonials from DAF fund holders in development communications to heighten awareness that your nonprofit recognizes and values of this type of charitable giving. Be sure to mention on all your materials that you accept gifts from DAFs, every solicitation and your nonprofit’s website should remind donors they can give from their DAF accounts. Facilitate DAF gifts by using tools like DAF Direct to allow a donor to give directly from their account through your website.
For more information, please contact Director of Advancement Mary Coleman at 561-391-7274, ext. 123 or at firstname.lastname@example.org