As 2020 comes to a close, philanthropy can make an impact on stabilizing communities, and donors play a leading role. With the end of the calendar year also comes the deadline for charitable giving, for those thinking of gaining a 2020 tax deduction. Here are three tips for making the most of your year-end giving:
1. Talk to your advisor
Contact your financial advisor, CPA, or attorney to talk about the strategic ways to use charitable giving to offset your tax liability, especially if you incurred a “taxable” event. You may consider creating a Donor Advised fund. Donor Advised funds can help maximize your tax benefits while making giving easy, effective, and enjoyable. Perhaps a Charitable Remainder Trust (CRT) is the vehicle for you. A CRT allows the donor to receive income for life while saving on income, estate, and capital gains taxes.
2. Evaluate your giftable assets
Some assets are better to donate than others. In fact, in charitable giving, cash is rarely king. For instance, donating appreciated stocks or property can help you avoid capital gains taxes. But if cash is your gift of choice, the 2020 charitable deduction allows an “above the line” deduction of up to $300 ($600 if married filing jointly) for charitable contributions. The CARES Act also relaxes limitations on deductible charitable contributions for taxpayers who itemize from 60% of AGI (Annual Gross Income) to 100% of AGI; and any unused deductions may be carried forward for up to five years. In addition, the CARES Act waives required minimum distributions during 2020 for IRAs and retirement plans; however, these RMDs may still be gifted directly to a charity in the form of a non-taxable event.
3. Consider housing your fund at the Community Foundation of Northern Colorado.
The Foundation offers individual donors the option of creating a highly customized charitable fund to carry out their charitable intent, including donor advised funds, scholarship funds, and designated funds. We provide services to help donors organize and maximize their charitable giving, both during and after their lifetimes. The Community Foundation also handles complex non-cash gifts (real estate, mineral interests, closely held stock, etc.) and serves as the trustee of charitable trusts. We do all this with the personal touch of a local nonprofit organization, small enough to know all of our donors and large enough to operate with great efficiency. Our donors have online access to their funds providing them with a permanent record of all gift and grant transactions.
Keep in mind that gifts by check must be postmarked by December 31 to be eligible for a 2020 tax deduction. Start non-cash gifts early to allow time for processing.
John Chapdelaine is director of the Eastern Colorado Community Fund, of the Community Foundation of Northern Colorado. He writes features on local philanthropy and giving options. To learn more about the Community Foundation of Northern Colorado or the Eastern Colorado Community Fund, visit NoCoFoundation.org, or contact John at (970) 580-1013 or John@NoCoFoundation.org.