Dear Friends of the Christian Brothers,
If you are reading this it is probably because you care about the Christian Brothers and support them. More than likely, you also support one or more of our schools and possibly several other charities.
In this series, we will mention some common questions, misconceptions, and tips about giving. Some of these you may look at and say, “Well, of course!” Maybe others will make you say, “I didn’t think of that.”
If you have questions or would like to discuss any of these ideas further, please feel free to contact me, Patrick Donahue, at (732) 380-7926, ext. 112, or at firstname.lastname@example.org.
*Please know that these tips are not intended to be legal advice. Before you finalize any charitable gift plan, please consult your financial and/or tax advisors to make sure it is right for your specific circumstance.
As it became more evident this spring that the coronavirus was a true pandemic, and was not going away any time soon, Congress enacted the CARES Act on March 27th. Along with the most heavily talked about aspects—direct financial relief, enhanced unemployment benefits, and relief for small businesses—it also contained some charitable giving incentives.
Since the new tax laws of 2017, many more of us do not itemize. However, for this year, the CARES Act gives everyone an above-the-line deduction of $300 for charitable contributions to your favorite charities (well, actually to most charities, but I didn’t think you would want to give to the ones you don’t like). Please note that this does not include gifts to Donor Advised Funds.
Larger Gifts of Cash
This year, the law also greatly increases the percentage of adjusted gross income (AGI) limitation up to 100% for cash gifts from individual taxpayers. Generally, a deduction of up to 30% is allowed for appreciated assets, but can be added to your cash gifts to total 100%. There are also increased AGI limitations for corporate gifts and food inventory gifts.
Charitable IRA Distributions
Even though the required minimum distributions from IRAs for those 70½ or older has been suspended through the end of the year, giving directly from your IRA still remains a wonderful way to make tax free qualified charitable distributions to charity.
Please Be Careful
Unfortunately, during any crisis, the number of scams trying to get your money or your personal information jumps dramatically, trying to prey on your good nature or your fear. Please always be careful. Continue to support the charities you know, and do not be afraid to check out any new solicitations before giving. Remember, do not give (or give information) if it does not feel right, just because you are being pressured.
Let’s talk about IRAs (Individual Retirement Accounts).
For most of us, retirement accounts have either replaced or supplemented traditional pension plans. They allow you to make before-tax deposits and pay no taxes until you withdraw. This is a great deal, but sometimes paying taxes upon withdrawal can affect your income level for the IRS, Medicare, etc. Remember, the IRS says you must begin annual withdrawals at age 70½, even if you do not need the income. In considering your own personal charitable giving, there are two questions to consider about your IRA.
Is making a charitable gift from my annual IRA withdrawal right for me?
Last year, Congress finally passed a permanent law allowing you to make charitable gifts (totaling up to $100,000) directly from your traditional IRA. The gift goes directly to the charity without even entering your income stream, therefore not affecting your income level. This can be a very nice advantage, especially for those who do not itemize, or who have concerns about not increasing their household income. More and more donors are now using this option, so most account providers are now making it very easy to gift all or any portion of your annual payment to a charity or charities. (Reminder: certain types of accounts, such as a SEP-IRA for example, are not eligible for this benefit.)
Should I leave my IRA to my heirs—keeping it with loved ones, and bequeath cash, stocks, or other property to charity?
The simple answer is “NO!” As a matter of fact, your heirs will probably be much better off if you reverse that asset distribution. Retirement funds are often the most highly-taxed portion of an individual’s estate. Often being subject to income and, in many cases, estate and other taxes as well. Your heirs will usually come out much further ahead if you pass retirement funds to charity tax-free, and reserve other less highly-taxed assets for them.
I have been told many times, “I would like to make a special gift, but I am worried about having income in my later years.” An annuity can be a simple answer. The Brothers of this District (DENA) now have the ability to offer Gift Annuities. A gift annuity is a simple one or two page contract that basically says that the donor (single or couple) will gift the charity a certain amount, and receive a percentage paid back annually for the rest of their life. It is usually a generous percentage, based on your age and a standard rate set by the government.
It is quite common for a donor, even a business-savvy one, to make a generous gift by writing a check, without considering whether a stock gift would be more beneficial for his or her tax purposes. If you have greatly appreciated stock (worth much more now than you paid for it), you can transfer the stock to a charity. You will pay no capital gains, and can take a write-off for the full current value of the gift. (Hint: If you think the stock will continue to grow, you can re-purchase the same amount. Now your cost-basis will be at today’s value.)