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Help Donors Give Smarter
As you prepare for your end-of-year campaigns, remember to highlight tax benefits for donors, especially for gifts of assets. Many of us call these gifts of assets “other ways to give,” but they should really be considered “the way to give” when you consider these gifts are usually larger than cash giving, the potential tax benefits, and that on average, 97%–99% of people’s wealth is in assets and not cash.
Research has shown that 12% of gifts happen in the last three days of the year (December 29th, 30th, and 31st). Therefore, it is crucial to promote the following ways that could give significant tax benefits to donors and increase the size of their regular cash giving; this includes everything from segmenting your donors to specific messaging through a multi-channel approach, targeted at the different ways of giving and the tax benefits.
The following are asset win-win gifts for you and your donors!
Qualified Charitable Distribution (QCD) or IRA Charitable Rollover
Donors 70½ and over are eligible to give up to a maximum of $100,000 per year from their IRA directly to a qualified charity and potentially lower their overall income tax while meeting the minimum qualified distribution.
- This is one of the most tax-efficient ways for donors 70 1/2+ to make gifts.
- Since the gift doesn’t count as income, it can reduce a donor’s annual income level instead of increasing their itemized deductions.
- 70-80 years old are the fastest-growing population in the US.
- This type of gift is usually much larger than the average cash gift.
When your donors make gifts of stock, they can avoid tax on any associated capital gains through a sale of stock. Donors giving stocks typically produce a more significant impact, giving 20 percent more on average, than if they sold the stock and then made a cash donation.
- Donors can avoid both income and capital gains taxes by donating equities.
- Assets remind donors of their wealth, and when they feel wealthy, they tend to give more.
Cryptocurrency value and trading have grown substantially in 2021. Gifts of crypto are handled similarly to securities where donors will not be taxed on capital gains and receive a tax deduction from their gift.
Want to know more about donating stock? Check out this article.
A Note on Colorado Specific Tax Implications
Colorado House Bill 21-1311 signed into law this summer limits the amount of itemized deductions under Section 63(d) of the Internal Revenue Code that a high-income taxpayer may claim for Colorado state income tax purposes. Effective January 1, 2022, this law could have negative consequences on giving from donors that itemize. However, donors could be incentivized to give more in 2021 to realize the full amount of deductions.