Countdown is On: Tax-Savvy Year-End Giving Tips
This is the time of year when many of us think about charitable giving as a part of our busy holiday to-do list. Your year-end charitable contributions can bring tax benefits, so now is a good time to review the tax-smart options available to you.
Outright Giving – The simplest ways to contribute to Trinity College is to write a check or use your credit card. Your cash gift is tax deductible if you itemize deductions. If you do not expect to itemize this year, you may be able to strategically “bunch” your contributions – for example, making both this year’s and next year’s contributions in the same year in order to maximize your tax benefits.
“CARES Act” Special Tax Incentives for 2020 Only – Your outright contribution may be eligible for special tax incentives this year. Charitable contributions of cash are deductible up to 100% of your adjusted gross income (“AGI”) in 2020. Ordinarily, these contributions are limited to 60% of AGI. And, for 2020 only, if you do not itemize your deductions you are allowed to reduce your taxable income by up to $300 for cash contributions to charity. [Please note that the tax incentives under the CARES Act are only for cash donations to public charities and not for donations to family foundations or donor advised funds.]
Giving Appreciated Securities – You can double your tax benefits by contributing stocks or other securities that are now worth more than you paid for them. You will receive an income tax charitable deduction for the share price and you avoid the capital gains tax that you would have owed if you sold them. Most gifts of securities can be electronic transfer, but be sure to direct that the securities themselves be transferred to Trinity College.
IRA “Charitable Rollover” – If you are age 70½ or older, a Qualified Charitable Distribution (“QCD”) allows you to contribute up to $100,000 from your IRA directly to Trinity College with no tax on the withdrawal. Please note that the Required Minimum Distribution (RMD) was suspended for the 2020 tax year, but will return in 2021. If you would normally be required to withdraw funds from your retirement plans, you do not have to take your RMD in 2020. But if you do chose to make a gift from your IRA, remember that cash gifts made before December 31, 2020 are deductible up to 100 percent of your AGI. Therefore, you might find it advantageous to withdraw funds and contribute a larger amount to Trinity. You will pay the tax on the withdrawal but will offset that tax with a larger than usual charitable deduction.
As always, your own advisers are in the best position to help you determine what would be most appropriate for you. We are available to work with you and your advisers as you consider gift options. Remember that some gifts can take longer to accomplish, so please be aware of timing if you are interested in meeting a year-end deadline.
