: 7 ways to make charitable giving more merry in a down market


With a weak stock market, surging inflation and high interest rates, charitable giving may seem less appealing. But here are some ways to make the giving work for both you and the charity.

Take a step back and look at where you want to give and how much you can give. Then, take a look at your personal tax situation. With the split Congress, it’s unlikely that there will be major tax changes on the horizon that require strategizing against, said Pam Lucina, chief fiduciary officer and head of the trust and adviser practice at Northern Trust Wealth Management. 

The 2022 deduction limits for gifts to public charities are 30% of adjusted gross income for contributions of noncash assets, if the assets were held more than one year, and 60% of adjusted gross income for contributions of cash. Contribution amounts that exceed these limits may be carried over up to five subsequent tax years. 

And with inflation, charities feel the pinch just like consumers.

“Charities still need funding – even more so in this environment. Charities need the money more than ever,” said Marie DeCaprio, partner, wealth adviser at Sax Wealth Advisory. “There are a few ways to donate that stand the test of time.”

Consider regifting

“People want to hang on to cash. So, gift shares that you may have been gifted yourself or inherited,” DeCaprio said. “If you gift those shares, you won’t have to realize the capital gain.”

Donate noncash assets

Another strategy to maximize charitable giving and minimized taxes is to donate appreciated noncash assets that you’ve held longer than one year. This strategy allows you to eliminate the capital-gains tax you would otherwise incur if you sold the assets first and donated the proceeds. 

The long-term capital-gains tax is typically 15% or 20%, depending on your income level. Eliminating this tax can increase the amount available for charities by up to 20%.

“People give cash instead of stocks because they think it’s complicated. But charities are very used to it. And there’s a real benefit to avoiding the capital-gains tax,” Lucina said. “Of course, taxes are not the only reason to give to charity.”

Also, given the down market, not everyone has appreciated stocks to give to charity. In the case of underwater stocks, it’s better to take the loss yourself and apply it against your income than to give stocks that are below value to charity, Lucina said. 

Bunch your contributions

Charitable contributions are only tax deductible for people who itemize their taxes, rather than take the standard deduction. The standard deduction is $12,950 for single filers and $25,900 for joint filers in 2022. 

To help exceed the standard deduction threshold, you could consider “bunching” charitable contributions. For example, rather than donating $10,000 to a charitable organization each year, you could make a $20,000 donation in 2022, and skip the donation next year. 

This strategy allows you to receive a tax benefit for the donation in 2022. Then you simply take the standard deduction on your 2023 tax returns. 

Consider a donor-advised fund 

Your contribution to a donor-advised fund will be deductible for 2022, but you can determine the grants at a later time. That gives you time to determine how and when to divvy up the actual donation. 

Take a qualified charitable distribution

Investors age 70½ and older can direct up to $100,000 a year from a traditional IRAs to a charity through qualified charitable distributions. The QCD can be used to satisfy all or part of your required minimum distributions for 2022 and the amount is not considered taxable income. 

The money needs to go directly from the IRA account to the charity and never touch your hands, said Eric Bond, wealth adviser of Bond Wealth Management. 

Two people who submit tax returns with married filing jointly status each qualify for an annual QCD of up to $100,000. Also, QCDs don’t require that you itemize. That means that you may use higher standard deduction, but still use a QCD for charitable giving.

Gifting through an IRA conversion

If you have a traditional IRA, you can use charitable donations to help offset the tax liability on the amount withdrawn and convert to a Roth IRA. Still, you need to be over age 59½ to avoid an early-withdrawal penalty. 

Don’t delay

Although you can give to charity year round, people tend to make it a year-end task, Lucina said. That said, there’s not much time to get these tasks done by the end of the year and brokerage firms tend to get inundated with year-end requests. So, don’t delay. 

“Get this done as soon as possible. And make sure to follow up that the check was received and cash by the charity before the end of the year,” DeCaprio said. “You do not want to wait until the last minute.” 

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