November 30, 2021
GivingTuesday: A Time to Consider Tax-Efficient Gifting Options
November 30 is GivingTuesday, a global generosity movement created in 2012 as “a day that encourages people to do good.” Over the past nine years, it has grown significantly, inspiring “hundreds of millions of people to give, collaborate and celebrate generosity.” GivingTuesday also has become a popular time for individuals to make their charitable contributions in contemplation of the holiday season. Here are five ways to help achieve your charitable goals for the year while also maximizing your income tax savings.
Highly appreciated securities
Most charities are set up to receive donations of marketable securities in addition to cash. By donating your highly appreciated securities directly to a charity, you may avoid realizing the built-in capital gain and be able to take a charitable deduction for the amount donated. Be careful to only donate securities held for longer than a year to maximize that deduction.
Qualified charitable distributions
IRA owners must be age 70½ or older to make a tax-free charitable contribution. Those who meet the age requirement can transfer up to $100,000 a year directly from an IRA to an eligible charity without paying income tax on the transaction. The IRA’s trustee must send your donation directly from the IRA for it to qualify, and no goods or services can be received in exchange for the donation. Each qualified charitable distribution reduces the amount of the required minimum distribution that is taxable to you.
Donor-advised funds (DAFs)
A DAF is a convenient solution for donors seeking to simplify the administration of their charitable contributions over time and maximize their tax benefits. As philanthropic vehicles sponsored by public charities, DAFs allow donors to make charitable contributions, receive immediate tax deductions and recommend grants from a fund over time. DAFs are designed to receive donations that are tax deductible to the donor in the year contributed, even if the funds aren’t distributed to charity until a future point in time. For example, you can “bunch” four or five years’ worth of charitable contributions to a DAF into a single year to exceed the standard deduction that was significantly increased by the Tax Cuts and Jobs Act of 2017. Donors can contribute a variety of assets, including cash, public and private securities, real estate, restricted stock, cryptocurrency and more.
Private or family foundation
A private or family foundation is a great way to establish a long-term giving mission for families looking to make substantial gifts to charity. As with a DAF, the donor can receive a tax deduction for the gift in the year donated. Foundations come with a good deal of administration, however, so they are best suited for families that wish to create a substantial charitable legacy.
Employer matching gift
Don’t forget that many employers have charitable gift matching programs. Employer matching gifts are a great way to supplement your gifts to the charities of your choice. Check your employee benefits guide or contact your human resources department regarding this possible benefit and program rules.
As with many tax-saving techniques, individual circumstances must be considered and tax projections should be run in some instances to fully understand the impact to you personally.
If you have questions, don’t hesitate to contact your Relationship Team or email PhilanthropicAdvisory@Glenmede.com.
Glenmede Donor-Advised Fund is offered under an agreement between The Glenmede Trust Company, N.A., and National Philanthropic Trust (“NPT”), a tax-exempt public charity that maintains exclusive legal control over contributed assets. This article is intended to be an unconstrained review of matters of possible interest to Glenmede Trust Company clients and friends and is not intended as personalized investment advice. Advice is provided in light of a client’s applicable circumstances and may differ substantially from this presentation. Opinions or projections herein are based on information available at the time of publication and may change thereafter. Information gathered from other sources is assumed to be reliable, but accuracy is not guaranteed. Outcomes (including performance) may differ materially from expectations herein due to various risks and uncertainties. Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Clients are encouraged to discuss the applicability of any matter discussed herein with their Glenmede representative.