For some reason, people tend to wait until just before year-end to do their big charitable gifts. I’m no different, but I wish I were. I guess it goes along with tax planning and maybe not knowing your financial situation as well in July.
Anyway, if you are about to do some gifting to your favorite non-profits, here three quick reminders:
- If you gift appreciated stocks/bonds/mutual funds/ETFs, you will avoid selling the shares and paying capital gains on the profits. You’ll get a deduction on the value of the shares you donate (subject to some IRS Limitations, but they are pretty big, so most people aren’t affected).
- Gifting to a Donor Advised Fund allows you to make a large charitable donation, but allow time to decide specifically which charities will benefit. So, if you are wanting to make a large gift for tax purposes in 2021, but not sure where you want all the money to go, opening a Donor Advised Fund (ex. Fidelity, Schwab, Vanguard, the Denver Foundation, Rose Community Foundation, the list goes on), can help you with those logistics.
- If you are aged 70.5 or older in 2021, the BEST way to gift to charity is through a Qualified Charitable Distribution. This lets you gift up to $100,000 per year to charity, satisfies your Required Minimum Distribution, and the money is NEVER considered income to you.
However, and here is tip 3 ½, your qualified charitable distribution from an IRA cannot go to a Donor Advised Fund. It needs to go directly to a charity.