Popular Year-End Strategies for Impact-Focused Philanthropists

As you discuss your year-end giving plan with your tax advisor, here are five popular strategies that are gaining traction with philanthropists across the country for your consideration:

1. Bunch gifts with a Donor Advised Fund

Because of higher standard deductions, fewer people are itemizing charitable gifts and using charitable deductions. One way around that is to “bunch” charitable gifts.

Example: A donor puts 5 years’ worth of donations into a Donor Advised Fund to exceed the standard deduction (currently $14,600 for single filers and $29,200 for those married filing jointly). The donor takes a tax deduction for the entire amount that year. Because the deduction is so large, the donor itemizes in that year. The next year, the donor takes the standard deduction instead. The donor still sends the same contribution at the same time to their favorite charities, but it comes from the Donor Advised Fund instead of a checking account.

2. Get tax benefits with appreciated assets

By gifting appreciated assets (stocks, real estate, etc.) held for over a year, you avoid paying capital gains tax and may deduct up to the fair market value of the asset. Remember: don’t sell then give. If you do, you’ll have to pay the capital gains tax. Instead, give it before the sale since the nonprofit doesn’t pay any tax when it sells.

If you’re age 70½ or older, you can give directly from your IRA or IRA rollover, making this strategy even better than itemizing deductions. This earned income is never taxed when it goes directly to a nonprofit (and we can help facilitate those distributions as outlined in #3 below).

3. Make IRA gifts at age 73+

Donors who are 73+ must take RMDs (Required Minimum Distributions) from their traditional individual retirement accounts. These distributions count as taxable income to the donor, but giving directly from your traditional IRA to nonprofit organizations does not count as income and counts as your RMD. You can give up to $105,000 per year this way.

You may make a qualified charitable distribution gift to our Season of Sharing Fund and/or our Suncoast Disaster Recovery Fund. Further, the Community Foundation offers a Pass-Through Designated Fund expressly for RMDs totaling more than $10,000 to your favorite charities.

4. Make IRA gifts at age 70½+

Even though RMDs don’t start until 73, direct donations from your traditional IRA are allowed starting at age 70½. You can give up to $105,000 per year this way. This earned income is never taxed because it goes directly to the nonprofits of your choosing.

5. Combine a Roth conversion with a donation

A Roth IRA conversion moves money from a traditional IRA into a Roth IRA. The benefit: all distributions from the Roth IRA (even future earnings) are tax free. Higher interest rates can mean higher earnings on investments, making this strategy even more attractive. The downside: all money moved into the Roth IRA counts as immediate income.

When a Roth conversion creates an income spike, charitable planning can create a deduction spike to help offset it. This can include strategies like charitable gift annuities, Donor Advised Funds, charitable remainder trusts, or paying a multi-year pledge early.

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We welcome the opportunity to discuss these options and other ways we can support your charitable efforts. Please call our Philanthropy Team at 941.955.3000.