Kathryn Roebuck Holding, J.D.
Director of DevelopmentEmail
To begin and for donors in central North Carolina
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 start a new fund at NCCF, grow your fund, donate to another fund or any combination of giving strategies.
Included below are tax-smart giving strategies to consider when making your 2020 charitable gifts, including new rules in the Coronavirus Aid, Relief and Economic Security Act (CARES Act) enacted this spring.
Supporting the causes you care about is more important now than ever before. Click here for important dates to keep in mind for your gift to be credited for the calendar year 2020. The NCCF Development Team would be happy to work with you on an individual plan for expanding the impact of your philanthropy.
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. Individuals may donate up to 30% of their Adjusted Gross Income (AGI) in charitable gifts of long-term appreciated assets. Non-cash assets can take more time to transfer than cash gifts; contact the Development Officer in your region to learn more.
“Bundling” charitable gifts
The Tax Cuts and Jobs Act of 2017 implemented a standard deduction that changed the way most taxpayers itemize charitable contributions. 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 establish or add to 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.
IRA Qualified Charitable Distributions
Although the CARES Act temporarily suspended the required minimum distributions (RMDs) from retirement plans in 2020, 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 DAF, you may use your QCD to support your local NCCF affiliate’s endowment, your favorite nonprofit organization or their endowment (see our full list of funds here), establish a designated fund to provide annual support to your favorite nonprofit organization, or start a scholarship endowment to support education in North Carolina.
New tax rules around charitable giving were included in the Coronavirus Aid, Relief and Economic Security Act (CARES Act) enacted this spring to incentivize charitable giving.
Two different incentives were provided for individuals who take the standard deduction and those who itemize their deductions, subject to the exceptions below.
Donors who do not itemize their charitable deductions can claim a tax benefit up to $300 for cash gifts made to public charities.
If you typically take the standard deduction on your tax returns, you can deduct up to $300 over the amount of the standard deduction for cash gifts made to public charities.
Donors who itemize charitable deductions may deduct cash gifts to public charities to offset as much as 100% of your income in 2020.
Typically, the income tax charitable deduction for cash gifts is limited to 60% of your adjusted gross income (AGI). 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). 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.
These two incentives apply to cash gifts made to public charities and do not apply to:
While gifts to donor advised funds are specifically excluded from these enhanced charitable giving provisions, you are still able to make a cash gift to start a donor advised fund or add 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, your favorite nonprofit organization or their endowment (see our full list of funds here), establish a designated fund to provide annual support to your favorite nonprofit organization, or start a scholarship endowment to support education in North Carolina.
Use a blended approach to 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:
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.
The material contained herein should not be construed as tax or legal advice.