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The end of the year is quickly approaching, and many people are making charitable contributions to their favorite charities. For good reason: our community – and the nonprofits who serve it – continue to be significantly impacted by the COVID-19 pandemic.
For donors, the recently passed COVID-19 Relief Act extends some benefits for making charitable contributions into 2021. One of these benefits includes the 100% income limitation for cash gifts.
While cash is the most common type of charitable gift, there are many giving vehicles for your philanthropy. With asset-driven gifts, you can support your favorite charities, expand your impact, and potentially reduce your tax liabilities.
Three options to consider beyond cash contributions for your charitable giving:
IRA Charitable Rollover or also known as Qualified Charitable Distributions
Certain owners of Individual Retirement Accounts (IRAs) can support their favorite charities without being subject to federal income tax on the distribution from a traditional IRA.
How it works: IRA owners who are 70 1/2 years old or older can transfer up to $100,000 of IRA assets to public charities without being subject to federal income tax on the distribution. If married, each spouse can transfer up to $100,000 from his or her IRA.
The charitable gift must be made directly from the custodian of the IRA to the qualifying charity. The Community Foundation of Tampa Bay has a variety of charitable funds that qualify for the IRA Charitable Rollover (also known as a Qualified Charitable Distribution). These include funds that support up to four of your favorite local and/or national charities and funds that support your charitable field of interests. Or designate the Community Impact Fund, which responds to ongoing and emerging needs in our community.
Gifts of Appreciated Stock
Donating appreciated securities – instead of cash – by the end of the year can be advantageous. Some charities, including the Community Foundation of Tampa Bay, can receive gifts of highly appreciated stock that could otherwise be subject to capital gain taxes.
How it works: An owner of long-term appreciated securities that’s gifted to charity can claim a deduction equal to the fair market value of the securities, claim a deduction of up to 30 percent of your adjusted gross income for the year, and potentially avoid any capital gain income on the appreciated value of the securities.
Complex assets such as business interests, real estate, privately owned assets, or even cryptocurrency can be a part of a philanthropic giving strategy. These contributions to a donor advised fund may provide the donor with an immediate tax deduction, which can be especially attractive in years when the donor has a taxable or unforeseen life event, like a surge of highly appreciated stock, inheritance or business sale.
How it works: Charitable deductions for these types of contributions are generally based on the assets’ fair market value. Most donations of complex assets will require a qualified third-party appraisal.
Some nonprofit organizations cannot accept these types of donations, but the Community Foundation can accept these types of gifts on the nonprofit’s behalf to benefit their endowment.
Talk with your advisors
At the Community Foundation of Tampa Bay, we believe there should be a personal plan for strategic philanthropy, no matter if you have $500 to donate or $500,000 to give. Each tax situation is different, so it’s important to talk with your professional advisors to see what might be right for you.
Sheila Kinman, CAP® is the Senior Vice President of Philanthropy at the Community Foundation of Tampa Bay where she helps donors design and fulfill their charitable giving goals. She is also a Charted Advisor in Philanthropy (CAP®), a designation that provides knowledge for guiding charitable individuals, businesses and foundations. Contact the Community Foundation of Tampa Bay for help with your charitable giving.