At a glance • Learn how to leverage your year-end charitable contributions • Identify tax benefits of an IRA charitable rollover
FALL 2022
• Year-end giving FAQs
Prepared for the Friends of Christian Appalachian Project As the end of 2022 approaches, we hope this newsletter finds you well. While this is often a busy time of year, it can also be a time of reflection. You may find yourself thinking back on the seemingly insurmountable challenges that we experienced these past few years. You may also reflect on the resiliency you witnessed, the creative solutions found, the astounding stories of those who came to the aid of total strangers, or the hope that bound us together. Reflection can be a powerful practice and can ground us in the truth that giving to, and caring for, others is good.
During this time of annual reflection and activity, it is not surprising that more than one-third of all charitable giving in the U.S. traditionally occurs in the final two months of the year. This annual outpouring of generosity is what sustains nonprofit organizations.
As the year comes to a close, please consider: • Are there organizations that represent my values which would benefit from my support? • What organizations need more support to continue serving their important missions and get through these challenging times? • Where do I stand with my tax liability and can charitable giving help? At Christian Appalachian Project (CAP) we are grateful that those who care about our mission continue to find ways to support us generously at year-end. Your support has helped offset additional expenses we have experienced in recent years; we are thankful. However, future challenges remain, and we count on charitable people, like you, continuing to be a transformational force in our community. Make the most of your year-end giving with these tips: • Determine your tax liability. • Review your investment portfolio. • Identify additional tools. • Do your giving early. • Talk to your advisors.
DETERMINE YOUR TAX LIABILITY.
Before the hustle and bustle of the holidays takes over, consider calculating your income and determine your tax liability for the year. Did your income increase? Did you sell any appreciated assets? Will you owe more taxes? If so, this alone may motivate increased giving before December 31. Standard deduction limits for 2022 tax returns are:
How do your eligible itemized expenses (charitable giving, mortgage interest, state and local taxes being the most common) stack up? Did you shift from being an “itemizer” to a “borderline itemizer”? If your itemized expenses are close to any of the standard deduction thresholds, you may find it advantageous to increase your giving before December 31 and then consider filing an itemized tax return every other year. This is sometimes referred to as a “bunching strategy” – advancing philanthropic giving from 2023 to occur in 2022 in order to meet or exceed the standard deduction limit. In this scenario, you can itemize your 2022 tax returns and then take the standard deduction the following year.
REVIEW YOUR INVESTMENT PORTFOLIO. As year-end approaches,
it’s a good idea to review your portfolio. In particular, look at the stocks you have held for more than a year to identify those that have appreciated in value. Which ones have appreciated the most, despite market volatility? It may be prudent for you to make your year-end gift using one or more of these appreciated stocks.
Here’s why: If you sold the stock, you would incur capital gains tax on the appreciation. However, if you give the stock to CAP, capital gains taxes are avoided. You receive a charitable deduction for the full fair market value of the stock (subject to the deduction limits), just as you would if you gave a cash gift. If you can’t use all of the income tax
charitable deduction from this year’s gift, you can carry it forward five additional years. The annual deduction limit for appreciated securities is 30% of Adjusted Gross Income (AGI). The fair market value for securities is the average price per share between the highest and lowest selling prices on the date of delivery. For mutual funds, the fair market value is the price per share at market closing on the date of delivery. Giving from depreciated securities may make sense as well. If you own securities worth less now than when purchased, you can sell them and contribute the cash proceeds. This way, you can take a capital loss on your return, which you can’t do if you donate those securities directly to CAP.
IDENTIFY ADDITIONAL TOOLS.
Your retirement account can be a beneficial tool for charitable giving. In fact, donors who are age 70 ½ or older may directly transfer up to $100,000 per year from an Individual Retirement Account (IRA) to public charities (other than a donor-advised fund), avoiding both income and estate tax. This is commonly referred to as a Qualified Charitable Distribution (QCD) or IRA Charitable Rollover. While assets that are held in a 403b or similar pretax retirement accounts do not qualify for QCDs, funds in those accounts can be transferred to a self-directed IRA and then distributed to a public charity as a QCD. A traditional IRA owner must take a required minimum distribution (RMD) from a retirement account when they reach 72 years of age. QCDs count towards satisfying the annual RMD, benefitting both the IRA owner and the charity. Giving through an IRA Charitable Rollover allows donors to reduce their taxable IRA balance while also benefitting the charity(ies). If you have an inherited IRA and are required to make a withdrawal, you can earmark all or a portion of the withdrawal for charitable giving and deduct it from your taxes.
DO YOUR GIVING EARLY.
Giving early is especially important if you want to make a gift of non-cash assets. Your professional advisor may be busy as the year ends. The sooner you can activate the gift process, the more likely you are to complete it before the yearend deadline and maximize its impact. As you consider your end-of-year charitable giving priorities, consider these questions: How much have I already given? • to my place of worship_____________________ • to my school, college, or seminary_____________ • to support healthcare and research____________ • to support social service organizations__________ • to other important causes and missions__________ Total___________ Does this amount meet or exceed my intended target for charitable contributions for the year? Have my circumstances changed in a way that I can contribute more?
TALK TO YOUR ADVISORS. Before making any significant gift to CAP or other nonprofits, you should have your CPA, attorney, and/or financial advisor help you understand the impact of your gift. We at CAP want your giving to be prudent, generous, and a joyful experience. We can help. As you can see, your tax benefits depend on what and when you give. We can assist you and your financial advisors with the planning and details of making a gift. We appreciate your support, so we’ll do all we can for you in return. Please remember to consult your professional advisors before you make a gift.
PIC OF CAP ASSISTANCE
YEAR-END GIVING FAQS Is my gift to CAP tax deductible? Yes. Because CAP is qualified as a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code, all gifts to CAP are tax deductible. To determine the deductible amount, consult your tax advisor.
If you are sending a gift by mail, the donation is effective on the date mailed as indicated by the postmark. If the envelope is postmarked by December 31 the gift is credited to 2022 even if it is physically received in 2023. The postmark is the key to your deduction.
Do I need a receipt to claim a tax deduction? Under IRS rules, you cannot claim a tax deduction for a contribution of cash or other property unless you maintain a record of the contribution in the form of either a bank record (such as a canceled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution. In addition, for a single gift of $250 or more, you are required to have a receipt from the charity to substantiate your claim prior to filing your tax return.
Many individuals donate securities at year-end. Many of these gifts are electronically transferred to CAP directly from the donor’s broker. The gift becomes effective the date the funds are reflected on the charity’s bank or brokerage account, not the date you instructed your bank or broker to make the transaction. Electronic transfers can be greatly affected by volume. As we get closer to December 31 it may take several days to move your gift from one account to another. Ensure you have given yourself sufficient time to make a gift of securities.
Does the receipt have to be a physical note? No. An electronic receipt is acceptable. When will I receive my receipt from CAP? Receipts are issued as promptly as possible as gifts are received. Do I need to provide a receipt to the IRS? No. Just keep your receipt in a file to support your claimed tax deduction (in case you are audited). The statute of limitations for the IRS for a substantial understatement of income tax is six years. Depending on what type of contribution you make, you may want to keep it longer. Consult your tax advisor for details. What is the last day I can make a contribution in 2022? It depends on your gift. If you’re contributing by credit card at CAP’s online giving page, you have until midnight on December 31. Your credit card must be charged in the same tax year that you want to claim a deduction.
As the season of reflection and generosity approaches, please accept the thanks of the participants, staff, and volunteers for your generous support of CAP. For more information about the year-end giving opportunities at CAP, please call 866.270.4227 or email us at plannedgiving@chrisapp.org. You may also visit our website at www.christianapp.org for more information or to give online. May 2023 bring you and your family health, happiness, and prosperity!