The tax year is coming to a close, and the Jewish Community Foundation of Greater Ann Arbor is here to help. With potential tax changes coming, make the most of your charitable gifts in 2021.
1. Gift Appreciated Assets
With the continued strong market & the proposed retroactive increase in the capital gains tax rates, charitable donations of appreciated property, such as stock or real estate, are more valuable than ever. Donating stock allows donors to avoid the higher capital gains tax and may provide a tax deduction. You may donate stock to nonprofit organizations like Federation and its community partners.
Gifting appreciated assets to open a Donor Advised Fund (DAF) or adding to an existing DAF at the Foundation is a simple, single transaction that allows you to make future donations to multiple nonprofits from your fund. Use this form to make gifts of stock to Federation or the Jewish Community Foundation of Greater Ann Arbor.
2. Up to 100% AGI Deduction
2021 likely will be the last year you can use a charitable donation of cash to offset more than 60% of your adjusted gross income (AGI). For taxpayers who are in a position to make a significant charitable gift, this may provide an opportunity. Note that contributions in excess of 60% AGI cannot be made to a donor-advised fund (DAF), so careful planning is in order to balance DAF & non-DAF contributions.
3. Gift IRA Minimum Distributions
You must take your first Required Minimum Distribution (RMD) for the year in which you turn age 72 by December 31 of that year. Although RMDs don’t start until 72, you can still make a qualified charitable distribution (QDC) if you are 70.5 years or older. You may donate up to $100,000 of your QCD tax-free directly to one or more nonprofits. The QCD counts towards your annual RMD. The QCD must be gifted directly to a charity & cannot be added to a DAF or private foundation.
4. Front-Load a DAF
“Bunching” multiple years’ charitable donations to open a DAF or add to an existing DAF may help you reach a total of itemized deductions that are greater than the standard deduction for a single tax year. The charitable dollars will be invested for growth in the fund, increasing the sum available to give to charity. You can then make charitable donations on your own timeline. Cash added to a DAF cannot count towards the 100% AGI deduction. The QCD counts towards your annual RMD. Remember: A QCD must be gifted directly to a charity & cannot be added to a DAF or private foundation.
5. Gift Retirement Assets in Your Estate
Assets in tax-deferred plans (IRA, 401(k), 403(b), etc.) are subject to income tax when distributed to heirs and must be depleted within ten years after receipt. (There are exceptions to this rule for spouses – speak with your estate attorney or financial advisor for clarification.) Naming a charity, such as Federation, a Jewish Community Foundation of Greater Ann Arbor DAF or other endowment, or another Jewish organization, as a beneficiary of your plan may help your heirs avoid income tax while you give to charity. You can also use this to open or add to an existing fund or endowment.
Additional Resources
With permission from our friends at the University of Michigan, the Jewish Community Foundation is pleased to share this Navigating Estate and Charitable Giving Webinar to help you understand and plan around the complex changing landscape of charitable giving and estate planning.