November 28, 2023

Get Ahead Before the Year’s End

Holidays and tax planning (although very different in the ways they are celebrated!) are both year-end traditions. No doubt (?) you’ve got the holidays covered, and perhaps your advisors are already helping you make sure your tax planning is in place. It’s a good idea to familiarize yourself with several important year-end charitable giving techniques and deadlines so you can be prepared for conversations with your attorney, accountant, and financial advisor, as well as the team at the Foundation.

Standard deduction reminders. Remember that the 2023 standard deduction for single taxpayers ($13,850) and married filing jointly ($27,700) is up nearly 7% over 2022. While this increase allows for more relief from income tax for most filers, it also sets a higher bar to exceed for those who itemize deductions. Keep your household’s standard deduction amount in mind when you tally your deductible expenditures, including your gifts to charity.

Itemization and bunching. If your total deductions are at or under the standard deduction amount for 2023, but you’ve had a particularly high income this year, you could benefit from increased deductions or a “bunching” strategy. “Bunching” means you are “front-loading” charitable donations into the current year, knowing that you plan to distribute these donations in future years. By structuring a large year-end gift to your donor-advised (or other charitable) fund at the Foundation, you could surpass the standard deduction threshold to further reduce your taxes in 2023. Then, your favorite organizations can receive support from your fund this year and in subsequent years. This strategy allows you to provide predictable, steady support for the causes you love.

Stock, not cash! Don’t automatically reach for the checkbook as you prepare for year-end giving! Gifts of long-term appreciated stock to your donor-advised or other type of fund at the Foundation is always one of the most tax-savvy ways to support your favorite charitable causes because capital gains tax can be avoided. Similarly, if you are a business owner, you can work with your advisors and the Foundation team to explore how you might give shares in the business to your fund at the Foundation as a part of your overall estate plan. Not only will transfers be eligible for a charitable deduction during the year of transfer (and at fair market value if you held the shares for more than one year), but these gifts could potentially reduce income tax burdens triggered upon a future sale of the business.

QCDs from IRAs. As always, keep in mind that the Qualified Charitable Distribution (“QCD”) is a very smart way to support charitable causes. If you are over 70 ½, you can direct up to $100,000 from your IRA to certain charities, including a field of interest, designated, unrestricted, or scholarship fund at the Foundation. If you’re subject to the Required Minimum Distributions (RMDs) rules, QCDs count toward those RMDs. That means you avoid income tax on the funds distributed to charity.

Fingers crossed on deduction legislation. Keep an eye on the Charitable Act, which, if passed, would permit a deduction for charitable gifts that exceed the standard deduction. The Charitable Act proposes to restore the pandemic-era “universal charitable deduction” and raise the cap from $300 for individuals ($600 for joint filers) to approximately $4,600 for individuals ($9,200 for joint filers). This legislation could be a game-changing incentive for your favorite charities and you!

Don’t miss year-end deadlines. Please reach out to Monika Collins to find out when certain transactions must occur to be legally completed during this tax year, including checks to your fund at the Foundation, which must be postmarked or hand-delivered no later than December 31. Gifts of marketable securities also need to be fully transferred by December 31, so please work with your advisors to contact us in plenty of time for our team to process and receive the transfer.