Giving at Year-End Is Good for the Community and Can Reduce Your Taxes

As Thanksgiving recedes and we begin to review the year 2021, there remains much for which we remain truly thankful. And yet there is the cloud of COVID which still hangs over our health, our financial well-being, and our community. Recovery is still a vision involving faith in our resilience and in our coming together to help each other get back on our collective feet.

In Otsego County, we have 164 registered 501(c)3 charitable organizations leading us on the recovery path. Most operate entirely with volunteers. Only 62 have even one paid staff person. Yet with limited resources, these nonprofits have risen to the challenge of making sure that the recovery is widely based and leaves no one behind.

This task is truly daunting. Any contribution you can make to help is greatly appreciated. 

Fortunately, our tax polices reward those efforts.  For every dollar you contribute to a qualified charity, our governments (state and federal) will reduce your taxes by as much as 30 cents as a reward for your generosity.  

Please consider the following thoughts about how you might be able to make a year-end contribution to your favorite nonprofits.  And remember that there is a hard deadline of December 31 for 2021 donations.

• For taxpayers who do not itemize deductions, you are each entitled to reduce your taxable income by up to $300 by simply making gifts before the end of the year to qualified charities.
• If you do itemize your deductions but are not yet ready to decide which organizations you want to support, you can establish a donor advised fund and get the tax deduction this year, while deciding later how to allocate your gift.  
• For those with IRAs who are at least 72, you must take your required minimum distribution (which is fully taxable) but you can eliminate that tax by making gifts to charities (up to $100,000).  Be careful, however, as those gifts must be given by your IRA and not by you personally, and they cannot be given to your donor advised fund.
• For 2021 (thanks to the CARES Act), donors are permitted to deduct charitable cash gifts equal to 100% of their adjusted gross income (compared to the usual 60%).  This “bonus” does not apply to gifts to your donor advised fund.
• Speaking of appreciated stock, this may be a good time to donate highly appreciated stock (owned for at least 1 year).  In addition to the charitable itemized deduction, you eliminate the capital gain tax on the stock’s appreciation.  
• A charitable gift annuity is another way to generate a tax deduction in 2021 while securing a fixed annual income for your lifetime.  At death, the funds in the annuity go to your designated charity.  The charitable deduction is relatively high right now as interest rates used to calculate the amount of the deduction are still very low.

Please consult your own tax advisors for specifics on these ideas and contact the Community Foundation of Otsego County which can assist you in achieving your charitable goals.

Regardless of whether tax considerations are important to you, this is a great time to consider supporting those nonprofits in our community who work tirelessly to help us and our neighbors.  Donating today and supporting those organizations would be a very nice way to say thanks for being there for us.

The Community Foundation of Otsego County is here to help you invest in your community.  For additional information, contact us a contact@cfotsego.org.

(This column by Harry Levine, board president of the Community Foundation of Otsego County, first appeared in The Daily Star on November 27, 2021.)