Planned giving can offer substantial tax benefits as well as the opportunity to support RiverArts in a significant way.
Donation of Appreciated Stock or Funds
When you give securities that have increased in value, you can often make the gift at a much lower cost than an equivalent gift of cash. For example, suppose you originally purchased shares of stock for $1,000 and those shares are now worth $10,000. If you sell the stock, you may be subject to capital gains tax on the increase in the stock’s value ($1,350 tax if you’re in the 15% capital gains bracket, or $1,800 tax if you’re in the 20% capital gains bracket). If you were to donate the appreciated stock to a 501(c)3 organization like Chestertown RiverArts instead, you may deduct the fair market value of the stock from your tax return, reducing your taxable income. In addition, you are not subject to capital gains tax on the transaction, which could result in significant tax savings.
If you are interested in donating securities, please contact our Executive Director, MariaWood@ChestertownRiverArts.org, 410-778-6300, for instructions to provide to your financial advisor.
Donating the Required Minimum Distribution from an IRA
Once an investor reaches 72 years of age they are required to begin withdrawing money from their Individual Retirement Account (IRA). The amount required to be withdrawn is called a Required Minimum Distribution (RMD) and is based on the IRS Uniform Life Table. The RMD is taxable income and causes not only an increase in income taxes, but may also increase Part B and D Medicare premiums. The extra RMD income can also result in an increase of Social Security income taxation.
In December 2015, Congress passed the Qualified Charitable Distribution provision and made it a permanent option. Now, an IRA holder over the age of 70.5 can donate up to $100,000 of their RMD to a qualified charity. The money donated reduces income instead of being claimed as a charitable deduction. The owner of the IRA may not take possession of the RMD – the funds must be distributed directly to the charity from the IRA custodian.
Contact your financial advisor or IRA custodian for assistance.
The passing of the CARES Act to provide Covid relief for the year 2020 included special opportunities for giving to non-profit organizations. Before the end of the year please consider making a cash donation that will be especially helpful in these challenging times and give you additional tax benefits.
If you itemize on your tax return, cash donations up to 100% of your Adjusted Gross Income can be deducted;
Corporations giving cash donations can deduct up to 25% of taxable income for the year 2020;
For tax payers who do not itemize, cash donations up to $300 can be take as Above-the-Line deduction, which brings additional tax savings (this benefit may be made permanent following 2020).
Please, remember to speak with a tax professional regarding these benefits and your individual situation.
There are ways to incorporate charitable giving into your estate planning process. Speak with your attorney about leaving donation instructions in your will. An individual may also make a non-profit organization the beneficiary of their IRA. Both methods can minimize the amount of income taxes imposed on your individual heirs and your estate. Most importantly, you can make a lasting impact on the non-profit organizations you care about most.
Donor Advised Funds
When you make a contribution to a Donor Advised Fund, you’ll be eligible to receive an immediate federal income tax deduction. Once you’ve made your charitable contribution, you can recommend grants from the fund over time. An easy way to think about a donor-advised fund is like a charitable savings account: a donor contributes to the fund as frequently as they like and then recommends grants to their favorite charity when they are ready.
As always, tax benefits depend on each individual’s unique circumstances, and you should always consult with your attorney, advisor and/or accountant before using any of these methods.