At United Way of Steele County we are deep into our annual campaign appeal to the community. We look to raise $800,000 to benefit 27 vitally needed local programs. As we are looking to meet this goal for our immediate needs we thought you might like some ideas on how to make the most of your charitable giving.
1. Choose charities carefully
You probably have certain causes near and dear to your heart, whether related to health, arts and culture or social and economic issues. But just as important as supporting the causes you’re passionate about is making sure that the nonprofits you choose use your charitable donations effectively and efficiently.
The United Way of Steele County funds local organizations right in your own community and handles this vetting process for you, allowing you to make one easy donation to the United Way and simultaneously support numerous local organizations that are vital to our community well-being.
2. Keep your charitable giving plans organized
If you’re not careful, you can end up mistakenly giving to the same charities and people multiple times a year or forget about donations that may be tax deductible. Make sure to get receipts from charities for your donations and keep them in a file so they’re easy to find when you complete your tax return. For gifts to loved ones, keep track of who you give money to and when so you’re not needlessly triggering a requirement to file a gift tax return.
3. Think about donating appreciated stock or assets
Many people automatically pull out their checkbook when it’s time to give. While cash gifts are quick, they may not be the best option. For instance, if you donate appreciated stock that you’ve held for more than a year the value of a charitable tax deduction is generally the full fair market value and you avoid paying the capital-gains tax that would result if you sold it and donated the cash. If the stock or another appreciated asset is donated, the charity can then sell it so all the money will go toward its mission. For depreciated assets, it is generally better to sell them yourself to take the tax loss and then give away the cash. This is because you can’t transfer the tax loss to another person.
4. Consider giving directly from your IRA, if over 70 ½
Your IRA charitable contribution could improve the lives of your fellow community members. Through UWSC, those dollars could ensure toddlers have transportation to preschool or that middle schoolers have enrichment activities after school.
You must be 70½ or older in order to make a qualified charitable distribution (QCD). You direct your IRA trustee to make a distribution directly from your IRA to a qualified charity. The distribution must be one that would otherwise be taxable to you. You can exclude up to $100,000 of QCDs from your gross income each year, thereby avoiding taxation on those amounts.
QCDs count toward satisfying any required minimum distributions (RMDs) that you would otherwise have to receive from your IRA, just as if you had received an actual distribution from the plan. However, distributions that you actually receive from your IRA (including RMDs) that you subsequently transfer to a charity cannot qualify as QCDs.
This is especially important now that the standard deduction has increased with Tax Reform. Many people are now taking the standard deduction instead of itemizing. With the QCD, you can make a charitable distribution to an organization like the United Way of Steele County and still take the higher standard deduction.
5 . Seek out lifelong charitable giving strategies
Ultimately, giving shouldn’t just be part of your yearly financial planning. Charitable giving should be part of your life plan. The reason: You can designate charitable and personal gifts before you pass away, and in some cases, potentially reducing any estate tax bill. We know you may have plans for your estate but don’t forget to leave your legacy with United Way of Steele County as well – to ensure our community is cared for in years to come.
A simple way to achieve this is designating a charity or person as beneficiary of specific accounts when permitted, such as your individual retirement account (IRA). But if you are willing and able to make a more sizeable gift, you may want to consider setting up a trust to benefit charitable or family interests. A charitable lead trust, for instance, provides income to charity today, while leaving the remainder to named beneficiaries; a charitable remainder trust pays income to you or your family for a period of years with the remaining principal going to the charities of your choice.
Another longer-term option for charitable giving is using a donor-advised fund, which allows you to claim a potential tax deduction today for funds you contribute to a charitable investment account that you can later make recommendations on how to allocate to nonprofits. Your financial advisor can help you explore these and other opportunities.
6 . Carve a total charitable giving plan
Charities often bombard people with emotional appeals during the holiday season. If you’re not careful, you could end up giving to ones that aren’t reputable, and you possibly won’t have enough left to give to the ones you really care about.
Consider organizations like the United Way to help streamline your local community giving strategy.
Develop a well-rounded strategy for charitable and personal giving, including an approach that reflects your values and the kind of long-term legacy you want to leave for others. This doesn’t mean you shouldn’t give to the occasional door-knockers and bell-ringers — rather you should make sure you’re using your charitable dollars as effectively as you can.
Giving money to the causes and people you care about most is an important and rewarding part of life.
Christina Wetmore is a board member of United Way of Steele County. Contact United Way at 507-455-1180. Our website is www.unitedwaysteelecounty.org.