8 Not-So-Crazy Year-End Giving Options for Last-Minute Donors

Crazy 8's is a card game where the objective is to give away all of your cards. The first player to give it all away, wins. I like that as an analogy to our work. "Give it All Away" might be a good follow-up to the "Giving Pledge", but I digress.

Every year, people receive appeals for donation from charities they have supported and often from other hopeful charities seeking new donors. Many of those are some version of: "Please Give NOW". As we connect with donors at the same time every other charity is doing the same, I encourage you to break away from the "Please Give NOW" crowd. Offer something new, something efficient, something creative- provide VALUE to your prospect. Here are eight totally-not-crazy options.

1.??? Get tax benefits even if you aren’t itemizing deductions

Make a charitable gift, get a charitable tax deduction. That’s great, but what if you can’t use these deductions? You can still avoid taxes.?

Give appreciated assets (stocks, real estate, etc.) and you’ll avoid paying any capital gains tax on the gain. Remember: Don’t sell then give. If you do, you’ll have to pay the capital gains tax. Instead, give it before the sale. The charity doesn’t pay any tax when it sells. (If your favorite charity doesn’t know how to accept or sell the asset, just give it to a donor advised fund first and then pay the charity from the fund.)?

If you’re age 70? or older you can give directly from your IRA or IRA rollover. This earned income is never taxed when it goes directly to the nonprofit. This makes it a smart way to give - even better than itemizing deductions!

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2. Give appreciated investments WITHOUT losing future growth potential of investments you like: The Charitable Swap

Donating appreciated assets creates TWO tax benefits. The tax deduction is the same as a gift of cash. (The asset must have been owned for a year or more.) PLUS, you avoid paying capital gains tax.

With a charitable swap, instead of giving cash, you give appreciated stock. Then you use cash to buy the same number of shares in the same company. Your portfolio mix doesn’t change. But the capital gain is removed because the shares are newly purchased and your overall cost basis increases which will lower your eventual capital gain liability if/when you sell. (There is no waiting period. Why? Because this is gain property not loss property. So, the “wash sale” rule doesn’t apply.)

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3. IRAs as Charitable Gift Accounts

Ages have increased over the last few years from 70? to now 73, but many folks over 70? must take RMDs (Required Minimum Distributions) from their retirement accounts like IRAs or IRA rollovers. These distributions count as taxable income. But giving directly from your IRA or IRA rollover to a nonprofit does not count as income and reduces your RMD. It’s a great way to give! You can give up to $100,000 per year this way.

And, even though RMDs don’t start until 73, direct donations from your IRA or IRA rollover are allowed from anyone starting at age 70?. You can give up to $100,000 per year this way, regardless of RMDs. This earned income is never taxed because it goes directly to the nonprofit. This makes it a smart way to give.

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5. Take advantage of higher interest rates

Interest rates have gone up. You can lock in these higher rates for life with a Charitable Gift Annuity. This gives you fixed annual payments for life and a charitable tax deduction while supporting the nonprofit. Higher interest rates make the charitable deductions even larger than before. For an extra tax benefit, you can fund these by giving appreciated assets instead of cash. To really maximize the benefits- defer the income until you feel like you'll need it. This is especially effective for folks still at peak earning years. Or, if you are 70?+, you can fund these with money directly from your IRA or IRA rollover. ($50,000 one-time maximum for IRA or IRA rollover.? This also counts against any RMDs.)

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6. IRA beneficiary v. gift in a will

Many people like to include a charitable gift in their will to support a cause that has been important in their lives. One tax smart strategy is to leave part of an IRA, 401(k), or 403(b) account to a nonprofit. (It’s easy to change account beneficiaries online.)

Why is this smart? Because living heirs pay income taxes on this money, but charities don’t. So, if you’re leaving anything to a nonprofit, use these accounts first.

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7. Bunch gifts with a donor advised fund

Because of higher standard deductions, fewer people are itemizing. This means fewer people can use charitable deductions. One way around that is to “bunch” charitable gifts.

Example: A donor puts 5 years’ worth of donations into a donor advised fund. The donor takes a tax deduction for the entire amount in that year. Because the deduction is so large, the donor itemizes in that year. In later years, the donor takes the standard deduction instead. The donor still sends the same money at the same time to his favorite charities; it just comes from the donor’s fund instead of from his checking account.

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8. Combine a Roth conversion with a donation

A Roth conversion moves money from a standard IRA into a Roth IRA. The benefit: all distributions from the Roth IRA, even future earnings, are tax free and a Roth IRA does not require annual distributions like a traditional IRA. Higher interest rates can mean higher earnings on investments, making this strategy even more attractive. The downside: all money moved into the Roth IRA counts as immediate income.

When a Roth conversion creates an income spike, charitable planning can create a deduction spike to help offset it. This can include strategies like charitable gift annuities, donor advised funds, charitable remainder trusts, retained life estate deeds, or paying a multi-year pledge early.

Take-Away: There is an option in this list for any donor of any age. The mantra is- Make Giving Mutually Beneficial! Rather than just beg, borrow, and steal- Give Back! Each of these techniques helps the donor AND the charity, and better yet- you still have time to do it this year!

*Disclaimer: As with all tax-related information- we recommend that donors seek personalized advice from their personal advisors to determine what is best for their personal situations.

**Shout-out to Russell James, J.D., Ph.D., CFP? for inspiring this list and providing reems of useful information to our field.