Intro Image - Get Ahead of the Year-End Rush

Get Ahead of the Year-End Rush

December 2, 2023

Holidays and tax planning — although very different in the ways they are celebrated! — are both year-end traditions. No doubt you’ve got the holidays covered, and perhaps your clients are already reaching out to make sure their tax planning is in place. It’s a good idea to familiarize yourself with several important year-end charitable giving techniques and deadlines so you can be best prepared for conversations with clients, as well as the team at the Community Foundation. We stand ready to assist! 

Remember that the 2023 standard deduction for single taxpayers ($13,850) and married filing jointly ($27,700) is up nearly 7% over 2022. While this increase allows for more relief from income tax for most filers, it also sets a higher bar to exceed for those who itemize deductions. Keep your client’s standard deduction amount in mind when you tally deductible expenditures, including gifts to charity. Reach out to the Community Foundation for help.

If total deductions are at or under the standard deduction amount for 2023, but you determine that your client’s particularly high income this year means they could benefit from increased deductions, a “bunching” strategy may be a good fit. “Bunching” means you are “front-loading” charitable donations into the current year, knowing that you plan to make these donations in future years. By structuring a large year-end gift to a donor-advised fund at the Community Foundation, you could surpass the standard deduction threshold to further reduce taxes in 2023. Then, your client’s favorite organizations can receive support from their donor-advised fund not only this year, but also in subsequent years. This creates an easier method of giving for your client and provides predictable, steady support for the causes they love. Our team can help you build a strategy!   

As you prepare your clients for year-end giving, remind them not to automatically reach for the checkbook! Gifts of long-term appreciated stock to a donor-advised or other type of fund at the Community Foundation are always one of the most tax-savvy ways to support your favorite charitable causes because capital gains tax can be avoided. Similarly, if you work with business owners, they can work with you and the Community Foundation team to explore how they might give shares in the business to a fund at the Foundation as part of their overall estate plan.

Not only will transfers be eligible for a charitable deduction during the year of transfer (and at fair market value if they held the shares for more than one year), but these gifts could also potentially reduce income tax burdens triggered upon a future sale of the business. 

As always, keep in mind that the Qualified Charitable Distribution (QCD) is a very smart and tax-savvy way to encourage philanthropy among your clients. Clients over the age of 70½ can direct up to $100,000 from an IRA to certain charities and funds, including unrestricted/discretionary, field-of-interest, designated, scholarship, or giving circle funds at the Community Foundation.

If your clients are subject to the rules for Required Minimum Distributions (RMDs), QCDs count toward those RMDs. That means they avoid income tax on the funds distributed to charity. Additionally, up to $50,000 from a QCD can be used to create a Charitable Gift Annuity. Our team can work with you and your clients to go over the rules for QCDs and evaluate whether the QCD is a good fit.

Keep an eye on the Charitable Act, which, if passed, would permit a deduction for charitable gifts that exceeds the standard deduction. The Charitable Act proposes to restore the pandemic-era “universal charitable deduction” and raise the cap from $300 for individuals ($600 for joint filers) to approximately $4,600 for individuals ($9,200 for joint filers). This could be a game-changing incentive for your favorite charities — and your clients!

We’re here to support you in planning ahead for year-end giving. Unless noted, take action on these opportunities by December 8:

  • Grant requests from advised funds and Charitable Checking AccountsSM to support your and your clients’ favorite charities.
  • Complete the transfer of stock gifts and alert us so we can properly credit your or your clients’ account. Gifts of marketable securities also need to be fully transferred by December 31. Privacy rules prevent some brokers from identifying donors. Email or call Andrew Muldoon at 585.341.4360 with the stock name and share count. We cannot accept shares of foreign stock after November 30 because their complexity makes it difficult to settle by year-end.
  • Get your clients tax-advantaged income for life while making a significant gift to a permanent fund in the future with a charitable gift annuity (CGA). As with bunching, larger gifts may make itemizing worthwhile despite the higher standard deduction. As mentioned above, your clients can create a CGA with a QCD of up to $50,000.
  • Mailed checks must be postmarked or hand delivered by December 31 to count in 2023. For an easy drop-off at our office, use the mail slot in the door of the “in” driveway. 

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