‘Tis the season for giving back! With holiday and end-of-year charitable-giving season upon us, here’s a rundown of information you will need.
With the year coming to an end, now is the best time to take care of your charitable giving. If you’re not sure where to start, APO Financial can help! With so many options available, it can be hard to know which charities are most worth your time and money. But with our help, you can find what works for you.
Be sure to make your gifts by the December 31st deadline for a 2022 deduction. Here are some options to consider for the year–end giving.
What is Charitable Giving?
A charitable donation is a gift of cash or property made to a nonprofit organization to help it accomplish its goals, for which the donor receives nothing of value in return. In the U.S., donations can be deducted from the federal tax returns of individuals and companies making them.
U.S. taxpayers are able to deduct donations equal to up to 60% of their adjusted gross income (AGI) annually. They must use Form 1040 or Form 1040-SR and itemize their deductible contributions on a Schedule A form.
Temporary Suspension of Limits on Charitable Contributions
In most cases, the amount of charitable cash contributions taxpayers can deduct on Schedule A as an itemized deduction is limited to a percentage (usually 60 percent) of the taxpayer’s adjusted gross income (AGI). Qualified contributions are not subject to this limitation. Individuals may deduct qualified contributions of up to 100 percent of their adjusted gross income. A corporation may deduct qualified contributions of up to 25 percent of its taxable income. Contributions that exceed that amount can carry over to the next tax year. To qualify, the contribution must be:
- a cash contribution;
- made to a qualifying organization;
- made during the calendar year 2020
Contributions of non-cash property do not qualify for this relief. Taxpayers may still claim non-cash contributions as a deduction, subject to the normal limits.
The Coronavirus Tax Relief and Economic Impact Payments page provides information about tax help for taxpayers, businesses, tax-exempt organizations and others – including health plans – affected by coronavirus (COVID-19).
Donor Advised Funds
If you are considering making a charitable donation, now is the time to do it. You can claim a tax deduction now for supporting your favorite charities in the future.
Donor advised funds can be created quickly and easily with a gift of $5,000 or more. And, with a gift of appreciated stock or mutual funds, you avoid paying capital gains tax on the sale of the stock and receive an immediate charitable income tax deduction for the full value of the asset.
Some donors opt to bundle or “pre-fund” their giving. This means donating two- or three-years’ worth of giving at one time into a DAF, claiming the charitable deduction that year, and then waiting to donate again while claiming the standard deduction. You can then donate to your DAF in the first year, and continue to support your favorite causes in future years from the DAF.
Gifting Real Estate
If you’re looking for a tax-smart way to give to your favorite nonprofit, consider gifting real estate or appreciated stock. When done right, this can be an excellent option for both the charity and the donor.
As a donor, you’ll be able to take advantage of a direct gift to benefit your favorite cause while also getting an income tax deduction and capital gains tax savings—and your donation will go even further, as gifts of appreciated property will help reduce any capital gains taxes you would owe on that property if you sold it yourself.
For the nonprofit, this is also a great way to receive long-term financial support from donors who are committed to the organization’s mission and goals.
IRA Qualified Charitable Distributions
If you are 70 ½ or older, you can make a gift from your IRA account to benefit your favorite nonprofit. Gifts made from your IRA are not reportable as taxable income and qualify toward your required minimum distribution. You can make gifts up to $100,000 per year, and in the long, this can lower your income and taxes. If you’re married your spouse can also give up to $100,000 for a total of $200,000.
One of the best things about this option is that an IRA Charitable Rollover can reduce your taxes, support or establish a fund to benefit one or more organizations you care about, and feel good knowing that you were able to make a major gift from your IRA.
Final Thoughts
This year, we’re all about giving back. Whether it’s donating your time or money, it’s important to make sure your gift will be used responsibly.
If you decide to give money to a charity this year, it’s important that you work with an advisor who can help you make sure your donation is protected. At APO Financial, we will work with you one on one to ensure that your donation is received.
We help you look at the bigger picture—especially when it comes to planning for life-changing moments. Our Fiduciary advisors are ready to guide you through your journey, from retirement planning to charitable giving.
Ready to get started? The first step is essential, so let’s get together for a complimentary visit to see if we want to travel down this road together. Contact us here today!
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