Eight Easy Ways to Make Year-End Giving Impactful
As we look toward year-end, we have much to be grateful for. Despite the highest inflation in over 40 years, rising interest rates, and frequent volatility in US stocks and other asset classes, Kitsap Community members remain steadfast in support of charities important to them. The love and care we have for each other is heartwarming – every day, Kitsap Community Foundation receives generous checks from donors, as well as recommendations for gifts to local nonprofits made through Donor-Advised Funds.
As you plan your year-end giving, you may want to consider the following giving strategies:
Donate appreciated non-cash assets instead of cash.
Maximize charitable impact and minimize taxes by donating appreciated non-cash assets (publicly traded securities, restricted stock, and private business interests) held longer than one year. Eliminate the capital gains tax (typically 15-20%) otherwise incurred if assets are sold first and then proceeds donated.
Consider establishing or using a donor-advised fund account, making tax-deductible contributions before year-end, and deciding on grant recommendations next year.
Any contributions of cash or non-cash assets received by December 31 are eligible for a 2022 tax deduction. Donors may then take time to develop a strategic giving plan and recommending grants to charities in 2023 using the charitable dollars set aside in 2022.
Satisfy an IRA Required Minimum Distribution (RMD) through a Qualified Charitable Distribution (QCD).
Individuals aged 70½ and older can direct up to $100,000 per year from their traditional IRAs to operating charities through QCDs. The QCD can be used to satisfy all or part of the donor’s RMD for 2022 and is not considered taxable income for the donor. Note: two individuals who submit tax returns with married filing jointly status each qualify for an annual QCD of up to $100,000. A donor wishing to make a 2022 Qualified Charitable Distribution should submit the request by the end of November to ensure the gift is received by December 31.
Donate cash from the sale of depreciated securities.
In a process called tax-loss harvesting, capital losses can be used to offset capital gains and up to $3,000 of ordinary income. Donors can then claim a charitable deduction if they donate cash from the sale proceeds.
Use a part-gift, part-sale strategy to offset capital gains tax from investment portfolio rebalancing at year-end.
Reduce the tax impact of rebalancing their portfolio by claiming a charitable deduction for donating appreciated assets in an amount that offsets the capital gains tax on selling appreciated assets.
Contribute appreciated real estate and continue to use it.
Contribute your residence, vacation home or farm now, while retaining the right to use and occupy the property for life. At your death, the charity gifted the real estate will own the property in its entirety. Note: contributions of real estate require special steps and additional time, including a qualified appraisal of the assets.
In a charitable bargain sale, you sell your real estate or securities to a charity for less than fair market value. The difference between market value and the purchase price represents your donation, which qualifies for an income tax deduction and is exempt from a capital gains tax. Note: contributions of real estate require special steps and additional time, including a qualified appraisal of the assets.
Tax deduction limits.
For donors who itemize deductions when filing their annual tax returns: 2022 deduction limits for gifts to public charities--including donor-advised funds--are 30% of adjusted gross income (AGI) for contributions of non-cash assets if the assets were held more than one year, and 60% of AGI for contributions of cash. Contribution amounts in excess of these deduction limits may be carried over up to five subsequent tax years.
Thank you for your interest in investing in the greater good as you give to the causes you care about! Please be aware that charitable contributions received by December 31 qualify for charitable deductions on 2022 tax returns; some non-cash asset contributions have review and processing times spanning several weeks or longer. As always, please consult your advisor for additional information.
Should you have any questions about the above information, please don’t hesitate to reach out to us at email@example.com or (360) 698-3622.