Tax Smart Strategies for Year-End Giving

Two people sit at a desk holding a phone, laptop and financial documents. As we near the end of the year, many clients are exploring ways to reduce their tax burden as well as achieve their philanthropic goals. As a trusted organization for more than 30 years, the Community Foundation is a place where charitable giving is personalized, local, and meaningful.  Here are some strategic tips you can share with your clients when discussing year-end giving.

⇒ Donate IRA Assets

If you are 73 or older and haven’t yet taken your required minimum distribution for 2023, you can donate up to $100,000 tax-free to charity and avoid paying taxes on the income.

Keep in mind that you can begin making qualified charitable distributions at age 70 ½, even before you’re required to take distributions from your IRA.

⇒ Bunch Multiple Year Gifts

With the increased standard deduction ($13,850 for individuals, $27,700 for couples for 2023), it may be difficult for some people to receive a tax benefit from charitable giving every year. When you bunch your charitable donations, you’re able to combine multiple years’ worth of contributions into a single tax year. By doing this, you can exceed the standard deduction limit, itemize your deductions, and reduce your taxable income more effectively.

⇒ Start a Charitable Gift Annuity

You can receive a fixed income stream for life in exchange for making a single gift to charity now. Plus, new laws allow you to create a charitable gift annuity with a one-time, tax-free transfer of up to $50,000 from your IRA.

Not all nonprofits offer charitable gift annuities, but The Community Foundation of Frederick County does.

⇒ Gift a Life Insurance Policy

Consider transferring the ownership of a life insurance policy you no longer need to charity. You will receive a tax deduction for the annual premium payments and can make a large future gift at a small cost now. There are several easy and simple ways to gift a life insurance policy including transferring ownership of the policy, donating a paid-up policy or naming a charity as a policy beneficiary.

⇒ Leverage Appreciated Stock or Mutual Funds

Donating highly appreciated stock directly to charity gives you a double benefit: You receive a deduction for the fair market value and also eliminate capital gains taxes. With early planning, business owners can also offset taxes from the sale of a privately held company by donating a portion of the interests to charity.

We recommend initiating year-end mutual fund gifts by December 1 and stock gifts by December 27.