Year-end charitable giving strategies*

Tip 1:
Consider donating highly appreciated stock or marketable assets (your winners).

  • Make sure you have held the stock for at least a year and one day. If you gift stock that has a shorter holding period, the charitable deduction could be limited to your cost basis.
  • The capital gain tax is avoided completely if you gift an appreciated asset directly to a qualified charity. If you sell the asset, you will owe either 15% or 20%, depending on your income, on the gain (sales price – cost basis).
  • Winners. You can still own your winners. If you like the asset you’re considering gifting, you can always purchase it with cash and establish your cost basis at a higher value.
  • Be aware of the Adjusted Gross Income (AGI) limitations. Both stock and cash have limits on the amount of your AGI that you can deduct each tax year. Stock donations are limited to 30% of AGI. See tip two for the great news on cash donations for 2021.
Tip 2:
Deduct gifts of cash through extended cash donation benefits.

  • For individuals who don’t itemize, there is an opportunity to claim a limited deduction on your 2021 federal income tax return for gifts of cash to qualified charitable organizations. Single filers can claim a deduction of up to $300, and married individuals filing joint returns can claim up to $600 (Reference: IRS.gov).
  • For those taxpayers who itemize deductions in 2021, there is a 100% AGI limit available on eligible cash contributions. The cash limit was 60% of the AGI. It is 100% of AGI for 2021.
Tip 3:
Carry forward any unused portion of your charitable deduction to the next tax year.
If the amount of charitable deductions you can claim for the current tax year is in excess of any AGI limitation, you can carry any unused charitable deduction forward for an additional five years.

Bonus tip:
If you are 70 ½ years old or older, consider a gift from your IRA – The qualified charitable distribution allows an individual with an IRA (other than an ongoing SEP or SIMPLE) to make a direct gift to charity without reporting the amount distributed on the tax return. If you are subject to the Required Minimum Distribution (RMD), the distribution to charity will satisfy this requirement. This is an extremely valuable way to gift to charity for individuals who don’t itemize (Reference: IRS.gov).

Jason Chestnutt, CERTIFIED FINANCIAL PLANNER™, is a free resource and enjoys confidential discussions about gift planning strategies that donors consider in their philanthropic, tax, investment and estate planning.

*The Collegiate School does not provide legal, tax or financial advice. We recommend that you consult professional advisors on all legal, tax or financial matters, including gift planning considerations. In compliance with IRS requirements, we disclose that this communication is not written to be used, and cannot be used, for the purpose of advice or to avoid tax-related penalties.

Jason Chestnutt

Leadership Giving Officer and Director of Planned Giving