This month we're discussing a few core approaches that we can use to prepare for next year.
Synergistic Nonprofit Donation Strategies with Tax Benefits
People find it rewarding to give their time and money to worthy causes for a variety of reasons. One of those reasons is the chance to do good for others, while also helping out your own family in a small way.
Last year offered a number of unique tax advantages for charitable giving. While many of those have since expired, there are still ways for donors to support the organizations they care about while also easing their tax burden.
1. Contributions of Appreciated Property
The financial markets may have had a bumpy year, but many donors still have appreciated property they may want to donate. This could be stock, real property, cryptocurrency, or other assets.
Your gift acceptance policy should guide you on what and how you might accept and convert property to cash. Consider carefully before you accept something too out of the ordinary.
2. Qualified Charitable Distributions
A Qualified Charitable Distribution allows individuals over 70½ years old to donate up to $100,000 in IRA assets directly to charity annually, without taking the distribution into taxable income.
This strategy may have also a long-term benefit as it may reduce future Required Minimum Distributions for that donor and have a positive impact on their estate plan.
3. General Considerations
In 2022, individuals who do itemize deductions can generally deduct cash contributions of up to 60% of their Adjusted Gross Income (AGI).
Individual taxpayers can continue to carry forward any excess charitable contributions for five years.
Donors may consider “bunching” contributions into 2022 to maximize their itemized deductions in one year and take the standard deduction the next, especially if they are going to fall just short of the itemizing threshold this year.
4. Planned gifts
Making a cause you care about a part of your estate plan can positively impact your tax situation today, but also have a profound impact on your heirs and the community in the future.
As always, the tax treatment of contributions is something for the donor and their own tax counsel to determine. But consider how these provisions might impact how you structure your asks between now and the end of year.