Year-end giving can have financial advantages for donors

With only two weeks left in the year, now is the time when most people think about donating to charities to help those in need and to help lower their taxable income during tax preparation next year.

About 30% of all donations will come in during the month of December, according to charities that count on these donations for their budgets in 2020.

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“The end of the year marks the shortest amount of daylight in the year. Christmas lights remind us, even in the darkest night there is a light of hope. Charity offers hope to those in deepest need,” said Dayton Kroc Center Administrator Maj. Gayle Senak.

Chris Wysong of Ameriprise Financial Services in Centerville said he gets a lot of questions this time of year from his customers about donating.

“If you itemize your deductions, charitable donations can be deducted from your income, lowering your taxable income for the year, up to 50% of your income. It is a nice incentive to give back,” Wysong said.

According to Wysong, many IRA owners over age 70.5 (a new law passed this week called the SECURE Act updated this age to 72 ) must take a Required Minimum Distribution each year based on their age and account value.

“You can donate these funds directly to a qualified charity from your IRA. You can benefit from this even if you do not itemize your deductions,” he said. “In the 2018 tax reform, the new standard deduction increased to $12,200 and joint to $24,400, making it harder for many people to itemize.”

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If you have a stock or mutual fund that has grown in value, Wysong notes that you typically pay taxes on the growth when you sell it. If you donate the stock or fund directly to the charity, you qualify for a current year itemized tax deduction for the current fair market value, but avoid paying the capital gains tax on the sale of the stock or fund.

“This is a great option for highly appreciated investments, as you avoid the gains but get the full value for the deduction,” he said.

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Michelle Lovely, vice president of development at the Dayton Foundation, said the foundation helps donors create charitable checking accounts and set up other options for giving, such as through grants and endowments.

But this year, charitable giving during the end-of-the-year is different after a 2019 that saw 16 tornadoes hit western Ohio the night of Memorial Day, a May KKK rally that came with a price tag of more than $650,000 and horrific Aug. 4 mass shooting in the Oregon District.

“We have been hit so hard this year, and a lot of the non-profits around town have really used a lot of their financial resources to help with the tornadoes and the mass shooting,” Lovely said. “They just keep helping these families that have been impacted.”

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But the one thing evident through all of this suffering according to Lovely, is just “how united we are as a community.”

“When you look at the budgets of non-profits and what their budgets have been for the year versus other years, financially from the non-profits’ perspective, if there is ever a year that they need donations, this is the year that they would need the donations because of all of the outpouring they have had to do in the community,” she said.

Financially, there are a lot of reasons why donors might think about giving before the end of the year.

“A couple things that we are telling our donors are gifts of stocks are still a great option because the stock market is doing well so they can donate appreciated stock,” Lovely said. “Anyone, no matter their age, when they donate appreciated stock to a charity whether it is the Dayton Foundation or other charities, nobody pays the capital gains tax.

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Bunching and bundling are strategies that are popular for charitable giving according to Lovely. They allow people to still donate to their favorite charities while gaining tax incentives.

Instead of making yearly gifts in the same amount, people may bunch together their gifts and make a major gift every two to three years. The major gift would be itemized for that year, and the standard tax deductions would be taken for the other years until a donor decides to make another major gift.

She noted that donors could either give that major gift to the charity directly, or they could create a donor advised fund, which is being used more frequently because of its flexibility and immediate tax incentives.

Ed Marrinan with the Greene County Community Foundation told the Dayton Daily News that charitable organizations look for important support during the holiday season.

“Donors wishing to give back to the region, first need to identify a cause - Arts and Culture, Family Health and Services, Recreation or Senior Centers. Then select their favorites,” Marrinan said.

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Many donors give cash or check but securities like mutual funds or stocks also can help out a good cause.

“Given the rise in the stock market this year, you may be able to obtain tax savings through directly gifting investment such as mutual funds or stocks,” Marrinan explained.

With so many in need, he said it is difficult to choose from so many worthy causes.

“Donors can make a difference by being more organized about giving,” Marrianan said. “Vehicles such as donor advised accounts provide a simple way to create effective giving.”

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Kroc Center’s Senak said fourth quarter giving provides both tax benefits and goodwill for company employees.

“Year-end giving is an investment in the company’s own workers,” Senak said. “We never know when a tornado or mass shooting would happen in our community. Charitable giving is an investment in surplus fiscal years to counter year of deficits.”

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Tax tips for charitable giving:

1. Donate Appreciated stock. Any age can do this. No capital gains taxes paid. Donor gets to write off the fair market value. More money goes to charity because of the capital gains tax avoidance

2. Bundling Donations. Standard deduction increased to $12,000 individual and $24,000 a couple with the passage of the Jobs Act of 2017.

3. If you itemize your deductions, charitable donations can be deducted from your income, lowering your taxable income for the year, up to 50% of your income.

4. Many employers match a certain percentage of monetary gifts given by employees to the nonprofit of the employee’s choice.

5. Research your favorite charities and matching situations to maximize your contribution.

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