Tax-wise year-end giving tips and tricks to keep in mind

by Kathryn Holding

Although it’s hard to believe, 2020 is rapidly coming to a close. Although time is running short, there is still time to make a gift to grow your fund, start a new fund, donate to another fund, or any combination of giving strategies.

Your support of causes you care about is more important now than ever before. We would be happy to work with you on an individual plan for expanding the impact of your philanthrophy.

There are new tax rules around charitable giving that were included in the Coronavirus Aid, Relief and Economic Security Act (CARES Act) enacted this spring, and strategies to consider as you contemplate year-end giving.

1. In 2020, you may deduct cash gifts to public charities to offset as much as 100% of your income.

Typically, the income tax charitable deduction for cash gifts is limited to 60% of your income. In 2020, the CARES Act allows especially generous donors to reduce their 2020 federal income tax to zero through cash gifts to public charities (subject to the exceptions below). Cash gifts include any contribution made by check, credit card and wire transfer.

If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount; you can carry forward any unused cash contribution deductions for up to five years.

There are some restrictions. The increased 100% AGI limit does not apply to:

  • Gifts of non-cash assets like stock or other illiquid assets
  • Gifts made to donor advised funds and split-interest giving vehicles (like charitable remainder trusts, charitable lead trusts)
  • Charitable contributions carried forward from a prior tax year

While gifts to donor advised funds are specifically excluded from these enhanced charitable giving provisions, have no fear -- you are still able to make a cash gift to your DAF and deduct up to 60% of AGI.

If you’d like to take advantage of the 100% AGI limit, consider making a cash gift to your local NCCF affiliate’s endowment or an agency endowment (see our full list of funds here). You could also establish a designated fund to provide annual support to your favorite nonprofit organization, or start a scholarship endowment to support education in North Carolina.

2. Appreciated assets are tax-effective gifts.

Gifts of appreciated assets like stock, securities, mutual funds, closely held stock, real property and others are often tax-effective gifts, especially when capital gains taxes can be avoided. The CARES Act does not change the AGI limit for charitable gifts of long-term appreciated assets (30% of AGI) or your ability to use gifts of appreciated assets to grow your donor advised fund. If you would like to make a gift of an appreciated non-cash asset, please contact the Development Officer in your region to assist you.

3. Give appreciated assets and cash to grow your donor-advised fund, support nonprofit organizations and take advantage of the increased deductibility threshold.

In 2020, you may consider a blended approach of giving both appreciated assets and cash to grow your DAF, support your favorite nonprofit and utilize the CARES Act’s increased income tax deduction threshold.

For example, you may:

  • Give long-term appreciated assets to your DAF in an amount up to 30% of AGI
  • Contribute additional cash to your DAF up to another 30% of AGI
  • Contribute cash equal to another 40% of your AGI to one or more public charities (including your favorite nonprofit organization, NCCF scholarship funds, designated funds or your local affiliate foundation’s grantmaking fund).

The result? The full amount can be deducted for 2020, you will avoid capital gains taxes by donating appreciated assets and you will grow your DAF to allow more impactful grantmaking to the nonprofit organizations you love.

4. IRA changes, QCDs, strategies:

The CARES Act temporarily suspended the required minimum distributions (RMDs) from retirement plans in 2020, allowing those assets to remain invested.

However, you are still able to make a Qualified Charitable Distribution (QCD) of up to $100,000 in IRA assets to a nonprofit in 2020, effectively reducing the taxable balance of your IRA. While a QCD may not be given to a donor advised fund, you may use your QCD to support other NCCF funds or start a non-donor-advised fund.

If you are between ages 59½ and 70½, are not dependent on your existing retirement funds, and are considering making a large donation in 2020, you may take advantage of the increased income tax deductibility threshold by taking a cash distribution from your IRA (thereby reducing your IRA taxable balance), making a cash contribution to a nonprofit and offsetting the tax attributable to the distribution by taking a charitable deduction in an amount up to 100% of your AGI, subject to the restrictions identified above.

5. “Bundling” charitable gifts is still an effective tax strategy

The CARES Act doesn’t change a tax strategy that has become popular since the Tax Cuts and Jobs Act of 2017 was passed: bundling or bunching charitable gifts in one year.

Charitable contributions can only reduce your tax bill if you choose to itemize your taxes. Generally, you’ll itemize when the combined total of your anticipated deductions – including charitable gifts – add up to more than the standard deduction. The standard deduction for single filer is $12,400, for married filing jointly is $24,800, and for head of household is $18,650. If your anticipated deductions are less than the standard deduction, you’ll likely choose to take the standard deduction and will not itemize.

Individuals who want to maximize their charitable deductions under the new tax laws can benefit by “bundling” their charitable gifts – i.e., make two or more years’ worth of charitable contributions in a single year. This strategy helps push taxpayers over the itemizing threshold, where they can reap the benefit of deducting the full value of their donations.

Bundling your charitable gifts is an ideal strategy to add to or establish a donor advised fund at NCCF. A DAF is a giving vehicle that allows you to make a gift and receive income tax deductibility, while having the ability to advise annual grants to support your favorite nonprofit organizations over time.

The minimum required to start an endowed donor advised fund at NCCF is $25,000, which would push a married couple filing jointly over the $24,800 threshold for itemization. For itemizers making gifts to DAFs, dollars are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted in five future tax years.

6. Increased deductibility for corporate charitable giving:

Corporate giving is normally limited to 10% of the taxpaying entity’s taxable income, but the CARES Act raises that limit to 25% for cash gifts made in 2020. Like the incentives for individuals, the company’s charitable gift cannot be made to a donor advised fund. If you’d like to work with NCCF and take advantage of this incentive, consider started a scholarship fund or making a gift to your local NCCF affiliate’s community fund.

As always, check with your financial or other professional advisor to determine what type giving is most appropriate for you.

The NCCF team stands by ready to assist you in your charitable giving this season.

{"tinyMCE_dummy":"","title":"Tax-wise year-end giving tips and tricks to keep in mind","url":"\/blog\/tax-wise-year-end-giving-tips-and-tricks-to-keep-in-mind","meta":{"title":"","description":"","excludeFromSitemap":"No"},"ordinal":999,"content":"<p>Although it&rsquo;s hard to believe, 2020 is rapidly coming to a close.&nbsp;Although time is running short, there is still time to make a gift to grow your fund, start a new fund, donate to another fund, or any combination of giving strategies.<\/p>\r\n<p>Your support of causes you care about is more important now than ever before. We would be happy to work with you on an individual plan for expanding the impact of your philanthrophy.<\/p>\r\n<p>There are new tax rules around&nbsp;charitable giving that were included in the Coronavirus Aid, Relief and Economic Security Act (CARES Act) enacted this spring, and strategies to consider as you contemplate year-end giving.<\/p>\r\n<p><strong>1. In 2020, you may deduct cash gifts to public charities to offset as much as 100% of your income.<\/strong><\/p>\r\n<p>Typically, the income tax charitable deduction for cash gifts is limited to 60% of your income. In 2020, the CARES Act allows especially generous donors to reduce their 2020 federal income tax to zero through cash gifts to public charities (subject to the exceptions below). Cash gifts include any contribution made by check, credit card and wire transfer.<br \/> <br \/> If your assets are substantial enough that you can give more than your income this year, you won&rsquo;t lose the deduction for the excess amount; you can carry forward any unused cash contribution deductions for up to five years.<br \/> <br \/> There are some restrictions. The increased 100% AGI limit does not apply to:<\/p>\r\n<ul>\r\n<li>Gifts of non-cash assets like stock or other illiquid assets<\/li>\r\n<li>Gifts made to donor advised funds and split-interest giving vehicles (like charitable remainder trusts, charitable lead trusts)<\/li>\r\n<li>Charitable contributions carried forward from a prior tax year<\/li>\r\n<\/ul>\r\n<p>While gifts to donor advised funds are specifically excluded from these enhanced charitable giving provisions, have no fear -- you are still able to make a cash gift to your DAF and deduct up to 60% of AGI.<\/p>\r\n<p>If you&rsquo;d like to take advantage of the 100% AGI limit, consider making a cash gift to <a href=\"\/communities\">your local NCCF affiliate&rsquo;s endowment<\/a> or an agency endowment (<a href=\"\/list-of-funds\">see our full list of funds here<\/a>). You could also establish a <a href=\"\/create-a-fund\/types-of-funds\/designated-funds\">designated fund<\/a> to provide annual support to your favorite nonprofit organization, or start a <a href=\"\/create-a-fund\/types-of-funds\/scholarship-funds\">scholarship endowment<\/a> to support education in North Carolina.<\/p>\r\n<p><strong><a id=\"email\"><\/a>2. Appreciated assets are tax-effective gifts.<\/strong><\/p>\r\n<p>Gifts of appreciated assets like stock, securities, mutual funds, closely held stock, real property and others are often tax-effective gifts, especially when capital gains taxes can be avoided. The CARES Act does not change the AGI limit for charitable gifts of long-term appreciated assets (30% of AGI) or your ability to use gifts of appreciated assets to grow your donor advised fund. If you would like to make a gift of an appreciated non-cash asset, <a href=\"\/about-us\/meet-our-staff#development\">please contact the Development Officer in your region<\/a> to assist you.<\/p>\r\n<p><strong>3. Give appreciated assets and cash to grow your donor-advised fund, support nonprofit organizations and take advantage of the increased deductibility threshold.<\/strong><br \/> <br \/> In 2020, you may consider a blended approach of giving both appreciated assets and cash to grow your DAF, support your favorite nonprofit and utilize the CARES Act&rsquo;s increased income tax deduction threshold.<br \/> <br \/> For example, you may:<\/p>\r\n<ul>\r\n<li>Give long-term appreciated assets to your DAF in an amount up to 30% of AGI<\/li>\r\n<li>Contribute additional cash to your DAF up to another 30% of AGI<\/li>\r\n<li>Contribute cash equal to another 40% of your AGI to one or more public charities (including your favorite nonprofit organization, NCCF scholarship funds, designated funds or your local affiliate foundation&rsquo;s grantmaking fund).<\/li>\r\n<\/ul>\r\n<p>The result? The full amount can be deducted for 2020, you will avoid capital gains taxes by donating appreciated assets and you will grow your DAF to allow more impactful grantmaking to the nonprofit organizations you love.<\/p>\r\n<p><strong>4. IRA changes, QCDs, strategies:<\/strong><\/p>\r\n<p>The CARES Act temporarily suspended the required minimum distributions (RMDs) from retirement plans in 2020, allowing those assets to remain invested.<\/p>\r\n<p>However, you are still able to make a Qualified Charitable Distribution (QCD) of up to $100,000 in IRA assets to a nonprofit in 2020, effectively reducing the taxable balance of your IRA. While a QCD may not be given to a donor advised fund, you may use your QCD to support other NCCF funds or start a non-donor-advised fund.<\/p>\r\n<p>If you are between ages 59&frac12; and 70&frac12;, are not dependent on your existing retirement funds, and are considering making a large donation in 2020, you may take advantage of the increased income tax deductibility threshold by taking a cash distribution from your IRA (thereby reducing your IRA taxable balance), making a cash contribution to a nonprofit and offsetting the tax attributable to the distribution by taking a charitable deduction in an amount up to 100% of your AGI, subject to the restrictions identified above.<\/p>\r\n<p><strong>5. &ldquo;Bundling&rdquo; charitable gifts is still an effective tax strategy<\/strong><\/p>\r\n<p>The CARES Act doesn&rsquo;t change a tax strategy that has become popular since the Tax Cuts and Jobs Act of 2017 was passed: bundling or bunching charitable gifts in one year.<\/p>\r\n<p>Charitable contributions can only reduce your tax bill if you choose to itemize your taxes. Generally, you&rsquo;ll itemize when the combined total of your anticipated deductions &ndash; including charitable gifts &ndash; add up to more than the standard deduction. The standard deduction for single filer is $12,400, for married filing jointly is $24,800, and for head of household is $18,650. If your anticipated deductions are less than the standard deduction, you&rsquo;ll likely choose to take the standard deduction and will not itemize.<\/p>\r\n<p>Individuals who want to maximize their charitable deductions under the new tax laws can benefit by &ldquo;bundling&rdquo; their charitable gifts &ndash; i.e., make two or more years&rsquo; worth of charitable contributions in a single year. This strategy helps push taxpayers over the itemizing threshold, where they can reap the benefit of deducting the full value of their donations.<\/p>\r\n<p>Bundling your charitable gifts is an ideal strategy to add to or establish a donor advised fund at NCCF. A DAF is a giving vehicle that allows you to make a gift and receive income tax deductibility, while having the ability to advise annual grants to support your favorite nonprofit organizations over time.<\/p>\r\n<p>The minimum required to start an endowed donor advised fund at NCCF is $25,000, which would push a married couple filing jointly over the $24,800 threshold for itemization. For itemizers making gifts to DAFs, dollars are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted in five future tax years.<\/p>\r\n<p><strong>6.&nbsp;Increased deductibility for corporate charitable giving:<\/strong><\/p>\r\n<p>Corporate giving is normally limited to 10% of the taxpaying entity&rsquo;s taxable income, but the CARES Act raises that limit to 25% for cash gifts made in 2020. Like the incentives for individuals, the company&rsquo;s charitable gift cannot be made to a donor advised fund. If you&rsquo;d like to work with NCCF and take advantage of this incentive, consider started a scholarship fund or making a gift to your local NCCF affiliate&rsquo;s community fund.<\/p>\r\n<p>As always, check with your financial or other professional advisor to determine what type giving is most appropriate for you.<\/p>\r\n<p>The NCCF team stands by ready to assist you in your charitable giving this season.<\/p>","excerpt":"","media":0,"custom":{"social_sharing":{"share_image":""},"blog_author":{"use_alternate_image":"No"},"masthead":{"title":"","counties":"","affiliate_logo":"","sub_text":"","background_image":"","caption":""},"post_image":{"image":"https:\/\/nmcdn.io\/e186d21f8c7946a19faed23c3da2f0da\/7868d48393ef4e3bb7bca8cdf7bc2f20\/files\/Kathryn-Roebuck-Holding.jpg"},"latest_blog":{"post":""}},"inMenu":false,"visibleTo":"Everyone","publishedAt":1603302894,"orderChildrenBy":"ordinal","enableComments":false,"permission":"read","id":"8d290d00276e4828b1fe003d88c15abc","parent":"e76aa785e2f140b6a8bdcb322b91b397","node":72519,"created":1603302894,"modified":1605193736,"fresh":1,"type":"post","children":{},"relations":{"author":[{"title":"Kathryn Holding","url":"\/authors\/kathryn-holding","source":null,"content":"","inMenu":false,"publishedAt":1561389926,"meta":{"title":"","description":"","excludeFromSitemap":"No"},"ordinal":0,"orderChildrenBy":"","permission":"write","tinyMCE_dummy":"","excerpt":"","media":[{"type":"image","url":"https:\/\/nmcdn.io\/e186d21f8c7946a19faed23c3da2f0da\/7868d48393ef4e3bb7bca8cdf7bc2f20\/files\/Kathryn-Roebuck-Holding.jpg","title":"Kathryn Roebuck Holding","caption":"","size":"12683308"}],"visibleTo":"Everyone","id":"9d31fd4e050344d9926808761d0cbc98","parent":"289475e074af44b1acb7a469b62466d2","node":63741,"created":1561389903,"modified":1561389926,"fresh":1,"type":"a4794d6408d04576a7acdd10c3fd249d","children":{}}]}}