Hello from the Morton Community Foundation!
It's November, which is hard to believe, and the Morton Community Foundation is here to help you navigate your charitable giving priorities all year round, and especially during the giving season when we know many of you are beginning to turn your attention to tax planning and ensuring that you'll meet your charitable goals before the end of December.
We are grateful for those of you who've already established a fund at the community foundation, and we are also grateful for those who are considering it. We’d love to work with you. The community foundation is our region’s trusted source for all things philanthropy, and we are honored to serve you as you pursue the charitable endeavors that mean the most to you and your family.
Wishing you all the best for a safe and happy Thanksgiving.
– Scott Witzig, Executive Director
Get ahead of the year-end rush
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 advisors are already helping you make sure your 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 prepared for conversations with your attorney, accountant, and financial advisor, as well as the team at the MCF. We stand ready to assist!
Standard deduction reminders. 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 household’s standard deduction amount in mind when you tally your deductible expenditures, including your gifts to charity. Reach out to the Morton Community Foundation for help.
Itemization and bunching. If your total deductions are at or under the standard deduction amount for 2023, but you and your advisors determine that your particularly high income this year means you could benefit from increased deductions, a "bunching” strategy may be a good fit for you. “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 your donor-advised fund at the MCF, you could surpass the standard deduction threshold to further reduce your taxes in 2023. Then, your favorite organizations can receive support from your donor-advised fund not only this year, but also in subsequent years. This allows you to provide predictable, steady support for the causes you love. We encourage you to check with your tax accountant for help in building a strategy that’s best for you!
Stock, not cash! As you prepare for year-end giving, don’t automatically reach for the checkbook! Gifts of long-term appreciated stock to your donor-advised or other type of fund at the community foundation is always one of the most tax-savvy ways to support your favorite charitable causes because capital gains tax can be avoided. Similarly, if you are a business owner, you can work with your advisors and the community foundation to explore how you might give shares in the business to your fund at the community foundation as a part of your overall estate plan. Not only will transfers be eligible for a charitable deduction during the year of transfer (and at fair market value if you held the shares for more than one year), but also these gifts could potentially reduce income tax burdens triggered upon a future sale of the business.
QCDs from IRAs. As always, keep in mind that the Qualified Charitable Distribution (“QCD”) is a very smart way to support charitable causes. If you are over the age of 70 ½, you can direct up to $100,000 from your IRA to certain charities, including a field-of-interest, designated, unrestricted, or scholarship fund at the community foundation. If you’re subject to the rules for Required Minimum Distributions (RMDs), QCDs count toward those RMDs. That means you avoid income tax on the funds distributed to charity. Our team can work with you and your advisors to go over the rules for QCDs and evaluate whether the QCD is a good fit for you.
Fingers crossed on deduction legislation. Keep an eye on the Charitable Act, which, if passed, would permit a deduction for charitable gifts that exceed 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 for you!
Don’t miss year-end deadlines. Please reach out to the MCF to find out when certain transactions must occur to be legally completed during this tax year, including checks to your fund at the community foundation which must be postmarked or hand-delivered no later than December 31. Gifts of marketable securities also need to be fully transferred by December 31, so please work with your advisors to contact us in plenty of time for our team to process and receive the transfer.
Gifts of “complex” assets deliver multiple benefits
When you think about supporting your favorite charities or making contributions to your donor-advised or other type of fund at the Morton Community Foundation, cash may be the first thing that comes to mind. It seems so easy to just write a check or donate online. (You probably don't immediately think of artwork or other types of assets!)
Most of the time, gifts of highly-appreciated marketable securities are the most logical non-cash gift. Gifts of publicly-traded stock, for example, are easy to transfer to your donor-advised or other type of fund at the community foundation. The MCF can provide you or your advisor with transfer instructions to make the process simple. As is the case with a cash gift, the community foundation will provide a receipt for tax purposes, and your gift of stock will be valued at the shares’ fair market value on the date of transfer. When the community foundation sells the shares, the proceeds flow into your fund without any reduction for capital gains taxes. This is because the community foundation is a 501(c)(3) charitable organization and therefore does not pay income tax. That would not have been the case, however, if you had sold the stock first and then transferred the proceeds to your fund at the community foundation; you’d owe capital gains tax on the sale. Especially in cases where you’ve held the stock a long time and it’s gone up significantly in value since you bought it, the capital gains hit can be significant.
Cash and publicly-traded stock are not your only options for adding to your fund at the community foundation. You can also give assets such as real estate, closely-held business interests, and even artwork or other collectibles. When you give assets like this to a fund at the community foundation or other public charity, the tax treatment of these “alternative” assets is the same as gifts of marketable securities in that no capital gains tax will be levied when the charity sells the assets, and, assuming the assets are “long term” capital gains property under IRS rules, you’ll be eligible for a charitable deduction at the fair market value of the assets on the date of transfer. Gifts of assets other than cash or marketable securities are sometimes called gifts of “complex assets,” but that does not mean the process needs to be intimidating. The team at the community foundation can work with you and your advisors every step of the way.
You can also use “complex” giving techniques to achieve your estate planning and tax goals. For example, if you are over 70 ½, the Morton Community Foundation can work with you and your advisors to execute a Qualified Charitable Distribution from your IRA to a designated or field-of-interest fund. Or, we can work with you and your advisors to establish a charitable remainder trust if you’d like to retain an income stream and also get the benefit of an up-front charitable deduction.
As the end of the year approaches, it’s a good time to evaluate your portfolio with your advisors to determine whether a gift of complex assets might help you support a critical need in the community while providing key tax benefits for you and your family.
If you have questions about an asset you’re interested in contributing, please reach out to us. The MCF is happy to help you establish a charitable giving plan and take the complexity out of giving complex assets.
Crisis giving: Avoiding pitfalls
Whether you’re motivated to respond to needs created by a conflict, accident, or natural disaster, it’s human nature to want to help—especially through financial support. All too often, a tragic event occurs and is quickly publicized through news accounts or social media. Then, the dollars start rolling into a crowdfunding site like GoFundMe, Kickstarter, or Fundly.
And therein lies a problem. Or a potential one, at least.
Well-intended zeal and urgency to give may not be truly aligned with the needs. Unfortunately, not all “dollar destinations” are legitimate, either in their authenticity or their declarations that a specified gift percentage will be delivered as intended. Among fraudsters’ tools are TV ads that can pop up overnight; illicit websites or URLs bearing seemingly familiar names (known as phishing); or digital money transfer recipient addresses or account names that are difficult if not impossible to verify. In some cases, donors are mistaken or confused about the deductibility of their contributions. Even the IRS is issuing warnings about crisis giving and potential fraud.
Count on the community foundation as your trusted source to authenticate grantee organizations. Our team not only knows the charitable landscape, but also we can fully vet recipient organizations for qualification and tax deductibility. The community foundation’s role is especially important and relevant in light of a recent study that revealed a growing decline in trust in nonprofits–despite nonprofit organizations still being among the most trusted organizations (along with small businesses).
The community foundation is here to help you navigate all of the considerations that factor into making a tax-deductible gift to a legitimate organization that can truly help offer the relief you intend. Indeed, mobile devices have made it easy to act on our honest instincts. However, in an increasingly impatient, noisy, and short-attention-span world that can carry a “get ‘er done” urgency, haste often makes waste.
Please give us a call to talk through your options for crisis giving and how to make sure your dollars get to the people and places that need it most.
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.
