With the K-shaped recovery being a hallmark of the pandemic, and the effects of COVID having vastly different ramifications for the poor and the wealthy, many people, women in particular¹, are increasingly curious about how to share their resources in tax-efficient ways.
Charitable giving isn't just for folks who have buildings etched with their name, they're also for generous, everyday folks who want to better the world around them. After almost two years of a seemingly nonstop negative news cycle, there are great people in our community who find themselves eager to help.
There are three groups of givers – modest givers, retirees, and those with highly-appreciated securities – and some considerations each should heed:
- The CARES Act created an above-the-line charitable deduction for cash donations. So, more modest givers who don't itemize their deductions should utilize the $300 deduction - it's up to $600 for married couples.
- For retirees, the options expand. Folks aged 70½ or older can gift up to $100,000 from their IRAs each year regardless of if they take the standard deduction or itemize. If you're charitably inclined, this is a smart way to reduce future required minimum distributions (RMDs), lower current and future taxable income, and preserve other assets for beneficiaries which are not subject to the new SECURE Act's 10-year distribution rule2.
- Gifting appreciated stock is a fantastic option for folks with concentrated and/or highly appreciated assets. Stocks held in a taxable account, that would otherwise be subject to capital gains taxes if sold, can instead be donated to charitable organizations. This strategy is beneficial for all parties - most importantly, the charity receives the full benefit of the gift (charities don't pay taxes), the donor reduces risk in their portfolio and reduces potential tax liability, and the donation can be deducted. In fact, for 2021, taxpayers can deduct charitable donations of up to 100% of their adjusted gross incomes. There are a few limitations with this allowance, so be sure to work with a financial professional for guidance on your personal situation.
- Using donor-advised funds (DAFs) is an excellent way to "bunch" charitable donations at once even if you're not ready to hand the donation over to organizations yet. You can deduct 100% of your donation (cash or securities) to the DAF in one year and make the contributions over several subsequent years. These tend to be great methods of giving for folks with a large taxable event in one year, such as the sale of a business or a sizeable inheritance.
Looking back on the ramifications of the pandemic and all the other needs around the world, the necessity for resources is great. For people who want to make a difference in a smart way but don't know where to start, the CERTIFIED FINANCIAL PLANNERTM Professionals at Pathfinder Wealth Consulting can help. We'll take inventory of what you have, helping prioritize your needs and the needs of your family first, and then help you think creatively about ways to support the people and causes that resonate with you. If you want to leave a legacy in your community, give us a call at (910) 793-0616 or visit our website at www.pwcpath.com. We are here to guide you forward.