St. Marys, PA, January 2, 2020: The Community Foundation of the Northern Alleghenies, and its affiliates, the Elk County Community Foundation and the McKean County Community Foundation, are inspired by working with donors to help them create charitable strategies and legacy gifts that benefit both the donors and their community. Donors can take advantage of various tax strategies to make the most of their charitable giving.
These Community Foundations have resources to help donors do the most with their means, at whatever level they are comfortable sharing. In addition to making a difference in the community, charitable giving can have tax benefits that are well worth exploring.
One strategy is to celebrate your 70 ½ birthday in a special way. At this age you must begin taking Required Minimum Distributions from your IRA and paying taxes on that additional income. Fortunately, the IRS allows generous donors to direct all or a portion of their distribution (up to $100,000) to entities like the Elk County or the McKean County Community Foundation. Any gift made directly to the Foundation is excluded from your taxable income.
Another strategy is called “Bunching”. In today’s tax environment, your charitable gifts may or may not be deductible on your tax return, depending on your ability to itemize in a given year. Charitable donations are deductible only if you itemize, which may be a less likely scenario for many taxpayers given today’s higher standard deduction. In 2020, the standard deduction will be $12,400 for individuals and $24,800 for married couples.
Taxpayers can benefit from the new tax law and get back some of the tax advantages of their charitable contributions by using Bunching. Essentially, this means combining perhaps several years’ worth of donations into a single tax year so that – along with your other deductions – you exceed the standard deduction. Then you’d take the standard deduction in the interim years.
Of course, bunching multiple contributions into a single year can feel daunting if you’re not sure how much you want to give and to whom. So to build some flexibility into your giving plan, you may wish to set up a donor-advised fund account at a community foundation, which allows you to donate a lump sum in the current tax year, invest the funds for future growth, and parcel out the money to qualified charities over time. The money can continue to appreciate once invested in a donor-advised fund account, which means the potential for even greater giving down the road.
The Community Foundation of the Northern Alleghenies is a nonprofit organization that manages endowed funds established by donors to benefit area nonprofit organizations. Donor gifts are tax deductible to the full extent allowed by law. For more information about donations, grant requests or other opportunities at the Foundation please contact them at 814-834-2125.