Six Year-End Charitable Giving Tips

BY Adam Rubinfeld, ANCHIN PRIVATE CLIENT

’Tis the season for pumpkin spice, gingerbread, the winter holidays – and the last opportunity for charitable giving before the end of the year. This year-end is a particularly significant deadline for charitable giving because it marks the close of extended tax breaks provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act which expired at the end of 2021. Here is a reminder of the current limitations as well as some ways to maximize the tax benefits of your charitable giving in these last few weeks of 2022:

1. Adjusted Gross Income Thresholds return to Pre-CARES Act levels. The removal of the limitation on cash contributions to qualifying organizations is a thing of the past. You can no longer reduce your adjusted gross income (AGI) to zero which was an option in tax years 2020 and 2021. Use the following to quickly recall the limitations in place for 2022: 60/30/30/20.
   1. Cash contributions to public charities, donor advised funds and private operating foundations are limited to 60% of AGI;
   2. Non-Cash contributions to public charities, donor advised funds and private operating foundations are limited to 30% of AGI;
   3. Cash contributions to private non-operating foundations are limited to 30% of AGI; and
   4. Non-Cash contributions to private non-operating foundations are limited to 20% of AGI
2. Consider donating non-cash assets that you have held more than a year. This strategy can help you avoid paying the capital gains tax that you would owe if you were to sell the assets first and then donate the proceeds.
3. If you are age 70½ or older, consider making a Qualified Charitable Distribution (QCD) of your Individual Retirement Account (IRA) assets. Individuals of this age group can make up to $100,000 in QCDs per year tax-free from their IRAs. This strategy can help you reduce your taxable income in future years, lower the value of your taxable estate, and limit your IRA beneficiaries’ tax liability. Keep in mind that processing takes time to complete, however, so the clock is ticking for initiating QCD requests.
4. Decide if “bunching” is right for you this year. Bunching means concentrating your deductions, such as your charitable donations, in a single year, with the plan to then skip deductions for one or even several years. This strategy tends to work well if you have a year where your tax liability will likely be higher than in future years.
5. Consider establishing a donor-advised fund (DAF). Establishing a DAF allows you to immediately donate funds and qualify for a tax deduction without first having to decide on the charities that will benefit. You can make that decision when you are ready.
6. Must Itemize Deductions. The above the line charitable contribution deduction, of $600 for married filing joint individuals, for non-itemized taxpayers is no longer available.

Of course, the above six tips are just a small sample of the ways that you can be prepared and maximize the tax-related benefits of your charitable giving for the 2022 tax year. An Anchin tax professional can help you determine the best strategies for your unique financial situation and giving plans. For more information or to discuss how charitable gifting would best fit into your estate plan, contact your Anchin Relationship Partner or Adam Rubinfeld, a senior manager in Anchin’s Private Client Group, at [email protected].