Considering a year-end gift?
The COVID-19 pandemic and associated economic impacts have highlighted that the impact on our friends and neighbors is uneven and disproportionate. Many service workers, communities of color, working families, students and the elderly have been severely affected and nonprofit agencies that assist them are straining under the weight of the need.
In the midst of this toughest year in our lifetimes, we continue to be touched by the generosity of our communities. At Humboldt Area Foundation, we have seen significant increases in giving prompted both by the COVID-19 impacts as well as in response to the fire disasters. Yet as quickly as the foundation can grant the money, there are many needs are that remain large and unmet.
The end of the year is when much charitable giving is traditionally done. Approximately 31% of all annual giving occurs in December and approximately 12% of all annual giving occurs in the last three days of December.
Earlier this year, Congress passed the CARES Act which changed some of the rules regarding the tax treatment of charitable contributions. Perhaps most notable is that people who take the standard deduction can still deduct up to $300 for charitable donations for 2020.
As you consider your plans to support your hometown in December 2020, please remember these important reminders for year- end contributions
• Gifts must be received in plenty of time for the gifts to be in the mail by Dec. 31 in order to ensure processing in 2020.
• Credit card gifts and online gifts must be successfully completed by midnight, Dec. 31, local time.
• Non- cash gifts such as appreciated stock may maximize your gift and help avoid capital gains taxes, but they require additional lead time. As always, non-monetary gifts are complex, and you should consult your tax advisor.
For those who itemize their deductions, you can elect to deduct cash contributions, up to 100% of their 2020 adjusted gross income, up from the previous limit of 60%. The new deduction is only for cash gifts that go to a public charity.
Giving to a Donor Advised Fund (or DAF) may be a way to lump multiple years of charitable giving into one year, which could allow a donor to increase their itemized deductions. Many financial firms offer DAFs, as does Humboldt Area Foundation.
Whether itemizing or claiming the standard deduction, individuals age 70½ and older can direct up to $100,000 per year tax-free from their Individual Retirement Accounts (IRAs) to operating charities through Qualified Charitable Distributions (QCD). By reducing the IRA balance, a QCD may also reduce the donor’s taxable income in future years, lower the donor’s taxable estate, and limit the IRA beneficiaries’ tax liability.
Under the CARES Act, required minimum distributions (RMD) that would have had to start in 2020 do not have to start until 2021, including distributions from defined benefit pension plans and 457 plans. Even so, making a QCD this year may still allow itemizers and nonitemizers alike to direct up to $100,000 from their IRA to charities in a tax efficient manner.
There are many worthy nonprofits that could use your support right now. In addition, the impact of the current pandemic will likely to reverberate throughout our community for many years. Not sure which nonprofit to contribute to? Websites such as https://www.charitynavigator. org/ or https://www.guidestar. org/ can be helpful sources of information. Alternatively, Humboldt Area Foundation has set up the Opportunity Fund to be able to support the highest priorities that arise, details at http://www.hafoundation.org.
Most of all, we ask that everyone do what we can to keep our community safe through these next few months. We are all in this together.
Your friends and neighbors at Humboldt Area Foundation.
In the midst of this toughest year in our lifetimes, we continue to be touched by the generosity of our communities.