On the first Sunday in November we “fall back” and return to Standard time. Soon it will be dark before dinner. Before you know it, holiday decorations will be up. The end of 2020 is upon us and we are looking forward to 2021.
This is the time of year when many of us think about charitable giving as a part of our busy holiday to-do list. Your year-end charitable contributions bring tax benefits – and there are some special opportunities for 2020 – so now is a good time to refresh your memory on some of the tax-smart options available to you.
Outright Giving – The simplest ways to contribute to Texas Methodist Foundation (TMF) is to write a check or use your credit card. Your cash gift is tax deductible if you itemize deductions. If you do not expect to itemize this year, you may be able to strategically “bunch” your contributions – for example, making both this year’s and next year’s contributions in the same year in order to maximize your tax benefits.
Special tax incentives for 2020 only – Your outright contribution may be eligible for special tax savings in 2020. Charitable contributions of cash are deductible up to 100% of your adjusted gross income (“AGI”) in 2020. Ordinarily, these contributions are limited to 60% of AGI. And, for 2020 only, if you do not itemize your deductions you are allowed to reduce your taxable income by up to $300 for cash contributions to charity.
Giving Appreciated Securities – You may be able to double your tax benefits by contributing stocks, bonds, or mutual funds that are now worth more than you paid for them a year or more ago. You will receive an income tax charitable deduction for the share price at the time of your gift, and you avoid the capital gains tax that you would have owned if you sold them. Most gifts of securities can be electronic transfer, but be sure to direct that the securities themselves be transferred to TMF.
IRA “Charitable Rollover” – If you are age 70½ or older, a Qualified Charitable Distribution (“QCD”) allows you to contribute up to $100,000 from your IRA each year directly to charitable organizations with no tax on the withdrawal. Although Required Minimum Distributions (“RMD”) have been suspended for 2020, if you are subject to an RMD, a QCD can help meet the required distribution without increasing your taxable income.
Donor Advised Fund (“DAF”) Distribution – Donor Advised Funds are the fastest-growing charitable giving vehicle in the United States. With a DAF you may contribute a large sum to establish the fund and then over time you can recommend grants from your DAF to the organizations you wish to support, like TMF. DAF contributions are popular at year-end since it makes your giving easy.
As always, your own advisors are in the best position to help you determine what would be most appropriate for you. We are available to work with you and your advisors as you consider gift options. Remember that some gifts can take longer to accomplish, so please be aware of timing if you are interested in meeting a year-end deadline. Our last business day of the year is December 31, 2020.