Does tax season get you thinking about how you gave in 2018? What goals did you create for yourself and how did you reach them? Year-end sneaks up on all of us, especially as we consider tax-deductible donations. We may find ourselves rushing around to respond to the needs of multiple nonprofits or hastily deciding what to give without really considering long-term benefits or impact.
Either way, tax time can serve as a great – and timely! – reminder to start thinking about the impact of our charitable giving throughout the year so that we can be prepared for the upcoming year-end. Whatever your hopes are for improving your community, the Community Foundation is here to help. Here are four tax-wise giving strategies to consider for the months ahead:
- Donor Advised Funds (DAF): A DAF is a giving tool that provides you with immediate tax benefits and allows you to support the charities you choose by recommending grants over time. DAFs provide a simple and efficient solution by giving you the flexibility to take immediate action or create a long-term difference in your community. This option may also be appropriate as an alternative to a private or family foundation. Learn more about the advantages of giving with a donor advised fund.
- Bunching: Did you know? You can use a donor advised fund to bunch multiple years’ worth of donations in a single year and itemize to receive maximum tax benefits for your charitable contributions. Then, in following years, you can take the standard deduction. Assets in your DAF can be invested, so your charitable dollars grow tax-free, allowing you to provide ongoing support for your favorite nonprofits, even in the years you claim the standard deduction. Learn more about bunching your donations.
- IRA Qualified Charitable Distributions (QCD): If you’re over the age of 70 ½, you’re eligible to receive a tax break if you donate up to $100,000 as a qualified charitable distribution (QCD) from a traditional IRA. A QCD can count as all or some of the IRA owner’s required minimum distribution (RMD), and the QCD amount is not added to taxable income as an RMD normally would be. The QCD is a particularly smart giving move for those who take the standard deduction and would miss out on writing off charitable contributions. Learn more about IRA QCDs.
- Highly Appreciated Stock: When you make a gift of appreciated stock to the Foundation, your gift qualifies for a tax deduction based on the stock’s market value. Instead of selling, you can avoid capital gains taxes and establish a charitable fund that benefits the local causes and organizations you care about most. With gifts of appreciated stock, your stock market earnings translate into community impact and provide a rewarding return on your portfolio. Talk with our staff about donating highly appreciated stock.
Depending on your giving goals, our staff can help you find a tax-smart solution to supporting the causes you love. Contact Ashley Coldiron at 501-372-1116 or acoldiron@arcf.org for more information.