year-end tips for charitable donations



It’s hard to believe, but the countdown is on to make your year-end charitable gifts. Due to deadlines imposed by various custodians and brokerage firms, it’s important to make decisions quickly and to implement them as soon as possible. Many of these institutions will not guarantee gifts will be processed after December 15. Here are some things to consider:


Qualified Charitable Distributions (QCD) – Those who are over age 70 ½ can transfer up to $100,000 per tax year from their individual IRA to charities of their choice. As long as the checks is are made payable directly to the charities, the amount given will not be included in taxable income. This could be very advantageous to those attempting to keep their income within a certain range to avoid increased Medicare premiums. Please note that each spouse may give up to $100,000 per year from his or her IRA, and the amount distributed counts towards their required minimum distributions.


Stock Donations – Given the continued increase in the value of many stocks, now is the time to consider gifting shares of highly appreciated stock to your favorite charity. Some might drag their feet about giving away their favorite stock; however, simply take the cash you otherwise would have given to your valued charity, and use it to purchase shares to replace those given away. This will “reset” the tax basis in your stock. This also allows for taxes to never be paid on the capital gains in the appreciated stock. Note: you should never gift stock worth less than what you paid – instead, sell the stock and realize the capital loss to lower your taxable income.


Bunching Donations – With changes in the tax law instituted in 2017, some individuals may no longer find it advantageous to itemize their deductions due to the larger standard deductions. In these cases, individuals may want to consider “bunching” their charitable deductions to their favorite charities in order to get the larger immediate income tax deduction by itemizing. The taxpayer generally gives the same amount to the charities; however, the timing of the donations allows the taxpayer to itemize that year. If a household intends to make this, and limit donations in subsequent years, be sure to communicate this to your favorite charities. Many charities count on these regular donations for their operating budgets and programs. It will be vital for them to know your plans for future contributions.


For more information, Jason Farris wrote an article about reclaiming charitable donations.


Donor-Advised Fund (DAF) – A donor advised fund could be helpful to a charitably inclined taxpayer with a large taxable event. This is particularly useful if the taxpayer needs a taxable deduction in a given year, yet needs more time to consider their charitable intent. Distributions may be made in future years to their favorite charities.


Check out Charlie’s article on the difference between DAFs and Private foundations for more information.


If you have further questions on charitable donations, please contact us.