Your questions answered: Year-end giving
As the end of 2021 approaches, we hope this newsletter finds you healthy and well, and preparing for a productive and fulfilling finish to this challenging year. While this is often a time of great activity, it can also be a time of important reflection. As the year comes to a close, perhaps you find yourself asking questions like the following:
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What are the essential tasks I need to accomplish before the holidays?
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Who have I lost touch with this year that I should contact before 2021 is over?
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Are there organizations that would benefit from my support who have played an important role in my personal story?
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What organizations need more support to continue serving their important missions and get through the continued challenges this pandemic has presented?
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Where do I stand with my tax liability and can charitable giving help?
During this time of annual reflection and activity, it is not surprising that traditionally more than 50% of charitable giving in the United States occurs in the final two months of the year. This annual outpouring of generosity is what sustains nonprofit institutions and organizations that people hold dear.
At Goshen College we are grateful that those who care about our mission and vision continue to find ways to support us generously at year-end. We are thankful for the continued support we have received that has helped offset additional expenses the pandemic has presented. But future challenges remain. Whatever your reason for giving, charitable organizations like ours benefit from your support, and we count on charitable people continuing to be a transformational force in our community and in the world.
Here are some tips to help you make the most of your year-end giving:
Determine your tax liability for the year.
Before the hustle and bustle of the holidays takes over, consider pausing to calculate your income and determine your tax liability for the year. Did your income increase? Did you sell any appreciated assets? Will you owe more taxes? If so, this alone may motivate you to increase your giving before December 31.
In fact, you may even want to move some of your giving to occur earlier than next year to create a larger charitable giving deduction for yourself in 2021, particularly in light of giving incentives included in the Coronavirus Aid, Relief, and Economic Security Act (otherwise known as the CARES Act) that was extended to 2021. The CARES Act allows an “above-the-line” deduction for charitable cash gifts of up to $300 for non-itemizers ($600 for married couples filing jointly). In addition, the CARES Act offers individuals the opportunity to deduct cash contributions to qualifying organizations for up to 100% of adjusted gross income (AGI). This is expanded from the previous limit of 60% of AGI. Businesses may also deduct up to 25% of taxable income, up from the previous limit of 10%. It should be noted that this expanded deduction is for cash gifts provided to a public charity like Goshen College.
Another fairly recent change that came from the Tax Cuts and Jobs Act of 2017 and went into effect in 2018 was to significantly increase standard deduction amounts – virtually doubling these levels. Below are the standard deduction levels for 2021 tax returns.
2021 Standard Deduction Levels
| Single | Head of Household | Married Filing Jointly |
| $12,550 | $18,800 | $25,100 |
How do your eligible itemized expenses (charitable giving, mortgage interest, state and local taxes being the most common) stack up? Did you shift from being an itemizer last year to a “borderline itemizer” this year? If your itemized expenses are close to any of the standard deduction thresholds, you may find it advantageous to increase your giving before December 31 and then consider filing an itemized tax return every other year. This is sometimes referred to as a “bunching strategy” – advancing philanthropic giving from 2022 to occur in 2021 in order to meet or exceed the standard deduction limit.
In any case, by the time you complete your income tax return, it will be too late to make charitable gifts for the previous year. Take the time to do some planning while you still have the opportunity to make adjustments and provide a year-end gift.
Review your investment portfolio.
As year-end approaches, it’s a good idea to review your portfolio. And in particular, it’s worth looking at the stocks and/or mutual funds you have held for more than a year to identify those that have appreciated in value. Which ones have appreciated the most? It may be prudent for you to make your year-end gift using one or more of these stocks or mutual fund shares.
Here’s why: If you sold the stock, you would incur capital gains tax on the appreciation. However, if you give the stock and allow Goshen College to sell it, capital gains taxes are avoided. You receive a charitable deduction for the full fair market value of the stock (subject to the deduction limits), just as you would if your gift was made with cash. If you can’t use all of the income tax charitable deduction resulting from the gift, you can carry it forward for up to an additional five years. The annual deduction limit for appreciated securities is 30% of AGI.
The fair market value for securities is the average price per share between the highest and lowest selling prices on the date of delivery. For mutual funds, the fair market value is the price per share at market closing on the date of delivery.
The flip side of giving from securities may make sense as well. If you own securities worth less now than when purchased, you can sell them and contribute the cash proceeds. This way, you can take a capital loss on your tax return, which you can’t do if you donate those securities directly to.
Do your giving early.
Giving early is especially important if you want to make a gift of non-cash assets (stock, real estate, etc.). Your professional advisor or broker may be extremely busy as the year winds down. The sooner you can get your gift activity going, the more likely you are to complete it before the end of the year and maximize its impact.
As you consider your year-end charitable giving priorities, you may benefit by considering these questions:
How much have I/we already given?
- to my place of worship $_____
- to my school, college, or seminary $_____
- to support health care and research $_____
- to support social service organizations $_____
- to other important organizations $_____
Total $_____
Does this amount meet/exceed my/our intended target for charitable contributions for the year? Have my/our circumstances changed in a way that I/we can contribute more?
Talk to your advisors.
Before making any significant gift to Goshen College or to any other nonprofit organization, you should have your CPA, attorney, and/or financial advisor help you understand the impact of your gift on your income tax return and estate plans. We at Goshen want your giving to be prudent, generous, and joyful.
We Can Help
As you can see, your tax benefits depend on what you give and when you give it. We can assist you and your financial advisors with the planning and details of making a gift to help support our mission. We appreciate your support, so we’ll do all we can for you in return. Please remember to consult your professional advisors before you make a gift.
Year-End Giving FAQ’s
Is my gift to Goshen College tax deductible?
Yes. Because Goshen College is qualified as a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code, all gifts to the College are tax deductible. To determine the amount you can deduct, consult your tax advisor.
Do I need a receipt to claim a tax deduction?
Under IRS rules, you cannot claim a tax deduction for a contribution of cash or other property unless you maintain a record of the contribution in the form of either a bank record (such as a canceled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution. In addition, for a single gift of $250 or more, you are required to have a receipt from the charity to substantiate your claim prior to filing your tax return.
If you make a quid pro quo contribution — that is, when you receive goods or services in exchange for a portion of your gift — the institution is required to issue you a receipt specifying the amount of the contribution and the goods and/or services received. For example, if you attend a benefit dinner and your charitable contribution includes the cost of the dinner, then the fair market value of this dinner must be subtracted from your charitable deduction.
Does the receipt have to be a physical note?
No. An electronic receipt is just as acceptable as a letter or postcard.
When will I receive my receipt from Goshen College?
Receipts are issued as promptly as possible as gifts are received, usually within a few days.
Do I need to provide a receipt to the IRS?
No. Just keep your receipt in a file to support your claimed tax deduction (in case you are audited). The statute of limitations for the IRS for a substantial understatement of income tax is six years, so retain the receipt for at least that long. Depending on what type of contribution you make, you may want to keep it longer. Consult your tax advisor for details.
Can I give from my retirement account?
Yes. In fact, donors who are age 70 1/2 or older may directly transfer up to $100,000 per year from an Individual Retirement Account (IRA) to one or more public charities (other than a donor-advised fund) and avoid both income and estate tax. This is called a Qualified Charitable Distribution (QCD).
An IRA owner must take a required minimum distribution (RMD) from a retirement account when she/he reaches 72 years of age. RMDs were not required in 2020 as part of the CARES Act provision. However, this requirement has returned in 2021. Consequently, if no distribution was taken and with the growth in the stock market, many IRA owners may find that their Required Minimum Distribution has grown significantly. This could mean that giving to charity as part of the RMD would now be even more appealing.
Giving through an IRA QCD allows donors to reduce their taxable IRA balance by directing gifts from their IRA to charities of their choice in a tax efficient manner. Let us know if you have an interest in making such a gift and we can advise you.
What is the last day I can make a contribution in 2021?
It depends on your gift. If you’re contributing by credit card at Goshen College’s online giving page you have until midnight on December 31. Your credit card must be charged in the same tax year that you want to claim a deduction.
If you are sending a gift by mail, the donation is effective on the date mailed as indicated by the postmark. If the envelope is postmarked by December 31 the gift is credited to 2021 even if it is physically received in 2022. The postmark is the key to your deduction and not the date on the check or the date a security certificate is signed over.
A large number of individuals donate securities at year-end. Many of these gifts are electronically transferred to Goshen College directly from the donor’s broker. In the case of electronic transfers, the gift becomes effective the date the funds are reflected on the charity’s bank or brokerage account, not the date you instructed your bank or broker to make the transaction. Electronic transfers can be greatly affected by volume. As we get closer to December 31st it may take several days to move your gift from one account to another. Make sure you have given yourself sufficient time to make a gift of securities.
As the season of reflection and generosity approaches, please accept the thanks of all of us students, staff, faculty and administration at Goshen College for your generous support.
If you would like to talk with any of us from the Goshen College development office about year-end giving strategies, you can find us at www.Goshen.edu/Give/contact/ You may also visit our website at www.Goshen.edu/give for more information. We are here to help you in any way we can.
