By Chris Green, CPA, Treasurer & Finance Chair, ACFL&MH Board of Trustees
Did you know that about $500 billion is donated to charities in the United States each year? It may be easy to assume that the bulk of those donations come from large corporations or foundations, but the truth is, most charitable gifts are given by individuals like you and me. In fact, in 2022, individual Americans donated 64% of the total $499.33 billion contributed that year. Pretty incredible, right?
At the Andrew Carnegie Free Library & Music Hall, we rely on public support to keep our programs going. Donations, big and small, make a huge impact. For example, a gift of $25 buys a book for our collection, $250 covers print and copy services for a month, and a gift of $2,500 helps underwrite our biannual newsletter. About 20% of our annual budget comes from our dedicated donors. Thank you to everyone who supports our mission and programs!
So, with our donors’ help, we get to continue our work, but what does a donor get out of donating? In addition to boosting your mood, strengthening your community, and supporting a great cause, making a charitable contribution can benefit you in more tangible ways, too. When you give, you may be eligible to receive certain tax benefits, as outlined below.
- Bunching Deductions. If you are close to the standard deduction limit, you can “bunch” two years of donations into one year. This could allow you to itemize in one year and take the standard deduction in the next year, thereby obtaining a higher total deduction amount over the two-year period.
- Gifting Securities. If you have a nonretirement account with investments in marketable securities, you can consider an “in kind” donation of securities. By gifting the shares of appreciated securities, rather than selling them and donating cash, you can deduct the value of the securities and never pay capital gains tax on the appreciation. If you sell the securities and donate the proceeds, you will be subject to capital gains taxes. This strategy only works for securities that are not in a retirement account or IRA.
- Making QCD from IRAs. At age 72, taxpayers are required to annually take a Required Minimum Distribution (RMD) from IRAs. If you have your IRA trustee make a payment directly from your IRA to the charity, the distribution counts toward your RMD and is not taxable. This is called Qualified Charitable Distribution (QCD). The key is that the Qualified Charitable Distribution goes directly from the IRA trustee to the charity. Note there is a $100,000 annual limit to a QCD.
Personal finances, and the related tax implications, are unique to each of us. The ideas described here – bunching deductions, gifting securities that have appreciated in value, and making Qualified Charitable Distributions from IRAs – can be effective strategies to reduce your taxes and therefore the cost of charitable giving depending upon your individual circumstances. Be sure to check with your tax advisor to see if any of these strategies makes sense for you and your unique tax situation.
However you decide to donate, we are grateful to have your support! Ready to give? Check out our Donate page to find out how you can support the Andrew Carnegie Free Library & Music Hall.