The generous prosper and are satisfied; those who refresh others will themselves be refreshed.

Proverbs 11:25

Some things we can’t control: the stock market.  So instead, focus on controlling the things you can: taxes, risk, and costs. Since 2017 (Jobs Act) and the doubling of the standardized deduction, churches, and other non-profit organizations have been concerned that fewer people would be financially incentivized to give.

Here are three areas to consider when making year-end giving with tax advantages:

1. Gifts of Appreciated Stock

Since 2009, the stock market has done exceptionally well. This means that a lot of folks are holding stocks with considerable appreciation. To sell these stocks would mean paying the capital gains due on these increases. But giving these appreciated stocks directly to the church bypasses the taxes and allows the non-profit to receive the entire stock value. The donor receives a charitable income tax deduction for the gift of stock by making the gift of stock directly to the church, therefore avoiding the costs of capital gains.

Another implication includes the impact the capital gains, i.e., income, would have on the donor. Large capital gains can trigger large tax liabilities in the future. Medicare premiums are determined by the amount of income that was derived the two years prior. Large capital gains will impact income and therefore increase the cost of Medicare premiums. Medicare premiums could potentially be lowered by donating appreciated stock and bypassing the capital gains.

2. Qualified Charitable Distributions

RDMs: Unlike 2020, Required Minimum Distributions must be made this year. Individuals 72+ can make gifts from their IRAs (up to $100,000) directly to a charity, satisfying their RMD.  This means that a $5,000 charitable contribution to the church, directly from the IRA, can bring in $5000 to the church and SAVE the donor $1,200+ in taxes. But the donation must come directly from the IRA to the church. If the donor receives the RMD and then makes the donation, the donor will receive a 1099 and pay taxes on the RMD.

3. Donor Advised Funds

Bunching multiple gifts into a singular year can be a tax-advantaged method of giving in a calendar year. This happens when the donor takes the standard deduction one year, and bunches their gifts into another year, allowing their gifts to exceed the standard deduction that year. Donations made to a Donor Advised Fund (DAF) are claimed the year that the donation is made. 

However, the distribution from the DAF can be made later (in another year). Appreciated stock and/or real estate are excellent, tax-advantaged ways to fund a DAF.

Most people want to give, but it is hard not to worry about running out of money in retirement. Tax-advantaged giving offers confidence that we can give to the non-profits we care about and still have what we need for years to come. 

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Your UMF has been assisting churches, institutions, and individuals since 1955 with financial services like these mentioned in this article. We liquidate stock donations to churches at no cost and we offer Endowments, Revocable Investment Accounts (RIAs), and Donor Advised Funds (DAFs) which have returned 9.4% since inception (1992). 

We at UMF appreciate your interest in this article and the teaching it offers. However, we are not your advisors. Instead seek out a legal advisor, a tax advisor, or a financial advisor before making any decisions. 

This article was written by Rev. Lynn Benson, Director of Legacy Giving. If we can be of additional assistance, please do not hesitate to contact Lynn at [email protected]