New Year, New Giving Plan
The beginning of the new year is the perfect time to map out your annual charitable giving plan. Did you know that 2019 was one of the highest recorded years ever for American philanthropic donations? Individuals, foundations, and corporate contributions totaled $450 billion to U.S. charities in 2019, a 4.2% increase from the previous year¹. While the final numbers are not out, in 2020, charitable giving through the third quarter was up by 7.6% on a year-over-year basis². Hopefully, with the global pandemic still upon us and many in need, 2021 can be a year for record-breaking charitable giving. Following are some considerations as you navigate your giving plan for 2021.
Review or Establish Your Charitable Giving Vision Statement
Similar to an investment policy statement, which is a written plan for your portfolio, a charitable giving vision statement is a written plan for your giving. Your vision statement might include the following:
- Define your “why” for giving
- Define what inspires you to give
- Define where you would like to give
- Define when you would like to give
Review Charitable Giving Tax Benefits and Strategies for 2021
Uncle Sam provides many tax incentives for charitable giving, which is no surprise that America ranks as one of the most generous nations. To ensure that you make your donations in the most tax-efficient way, the following highlights some notable charitable tax planning considerations for 2021.
- The 100% Income Limitation for Cash Gifts was extended to 2021 - This limitation – for cash gifts only – means that the donor can deduct an amount up to their adjusted gross income (but can carry forward the excess for up to five years). This tax benefit is not available for gifts to donor-advised funds or supporting organizations.
- The $300 Universal Charitable Deduction was extended to 2021 - available to those who do not itemize on their federal income taxes. The law now clarifies that for gifts after January 1, 2021, the deduction is $300 for a single individual and $600 for a married couple filing a joint return. As with the previous law, this deduction is not available for gifts to donor-advised funds or supporting organizations.
- Qualified Charitable Distribution (QCD) – A QCD is available to individuals age 70 ½ and older. A qualified charitable distribution allows a donation of up to $100,000 per year to a qualified charity directly from your IRA. Your donation is excluded from income tax equal to the amount given and allows individuals subject to a required minimum distribution to satisfy it with the gift.
- Donation of Appreciated Securities – A gift of appreciated securities to charity allows one to eliminate recognition of capital gains on those securities and to potentially receive additional tax benefits if you itemize your deductions.
- Donor-Advised Fund (DAF) – Utilizing a DAF can simplify the donation of appreciated securities to charity and provide more control over the timing of your gifts.
- Bunching Charitable Contributions – Bunching charitable contributions in one tax year can enable you to exceed the standard deduction and become eligible to itemize your deductions.
- Consider donating qualified retirement plan assets upon passing – With the passing of the SECURE Act in 2019, qualified plan assets are not the most tax-efficient assets to pass on to heirs. Most non-spouse beneficiaries now have to empty the account by the end of the tenth year after the year of inheritance. When you leave retirement plan assets to charity at death, this eliminates income tax on these assets and removes it from your taxable estate.
Meet with a Financial Professional
Just like we are all unique, so are our wealth plans. Charitable giving vision statements and tax benefits are not a one size fits all. If you would like professional guidance with your charitable giving plan for 2021, please reach out to our Vision Capital Partners Team.
“No one has ever become poor by giving.” - Anne Frank