Year-end is here and we’re busy at the Community Foundation helping donors finalize their charitable gifts for 2023. To help ease the stress of the season of giving, let’s work together now to help make your giving experience easier and more enjoyable with some year-end giving tips.

You may not know the best way to give or even where you want to give, perhaps your driving reason to give is trying to reduce your tax burden this year… that’s ok and it’s why we are here at the Community Foundation to help guide you and provide options. Don’t hesitate to reach out and let us help you explore your options before year-end.

Maximize charitable impact and minimize your taxes with these tips.

“Bunch” Charitable Donations in 2023

If the total of your itemized deductions will be below the level of the standard deduction, it could be beneficial to combine or “bunch” your 2024 and planned 2025 charitable contributions into this year and itemize your deductions in 2023, then taking the standard deduction on your 2024 tax return.

This strategy of bunching could potentially help you produce a larger two-year deduction than if you separated your giving into two different years.

Make gifts into or open a Donor Advised Fund

A Donor Advised Fund (DAF) at the Community Foundation allows you to make a gift before year-end and claim your tax deduction in 2023, then give the funds away over time. During this time, your charitable dollars can be invested and growing tax free so that you can amplify your giving. 

Donor Advised Funds through the Community Foundation allow donors, and their families, to participate in the research, selection and awarding of grant dollars if they wish. Donors are free to give to any charitable cause, local or not, through a Donor Advised Fund.

Many donors like to open a DAF and use the “bunching” technique above so that they can put their charitable contributions into one charitable account and decide over time when and where to make their grant recommendations.

Give from your IRA

Satisfy your IRA Required Minimum Distribution (RMD) through a Qualified Charitable Distribution (QCD)

Thousands of donors around the country each year take advantage of making a qualified charitable distribution from their IRA. That’s because anyone the age of 70 ½ and older can direct up to $100,000 per year from their traditional IRA to a charity, like the Community Foundation, and satisfy all or part of your RMD for the year. When you make a QCD, that distribution is not considered taxable income for you. Meaning you can make a difference and lower your taxable income in the year you do a QCD.

Note that two individuals who submit tax returns with married filing jointly status each qualify for an annual QCD of up to $100,000.

Pro tip: You cannot make a QCD gift into a donor advised fund. But you can contribute to the Community Foundation’s programs and services, the Community Investment Fund, towards life needs of our scholarship students, to one of many local nonprofit endowment funds or to a field of interest fund (like arts & culture, health and human services, education and more).

Donate appreciated stock instead of cash

Even though the markets haven’t been great at the end of this year, there are still donors with assets in their portfolio that have a very low cost basis and it has gained value over time. 

One of the most effective strategies for giving while minimizing your taxes remains to donate that appreciated stock directly to the Community Foundation. Generally, you can eliminate capital gains tax that you would otherwise incur if you sold the stock first and then donated the proceeds to the Foundation.

We encourage you to ask your tax preparer if bunching your charitable giving into 2023 makes sense for you. Pro tip: Put your bunched gifts into a donor advised fund, see above.

You have appreciated privately held business interests or real estate

The Community Foundation can help you plan with the appropriate advisor (tax and/or legal) to contribute privately held business interests or real estate. This process involves qualified appraisals of the assets, meaning it takes longer for this type of gift to be reviewed, accepted and finalized. If this type of gift interests you, please contact the Community Foundation to discuss further.

Donations must be received at the Community Foundation by December 31 to qualify for charitable deductions on your 2023 tax returns. If you want to plan a non-cash asset contributions, those have to be reviewed and processed so it can take several weeks or longer, therefore make sure to get in touch with the Community Foundation as soon as possible for those types of donations.

Additionally, if you wish to make a 2023 QCD from your IRA, we recommend that you submit your request by the early December to ensure there’s ample time to process and have the Community Foundation receive the gift.

*The Community Foundation does not provide tax or legal advice. We encourage donors to plan with their appropriate advisors for complex gifts and to include the Community Foundation in those conversations to ensure your charitable plans can be accomplished in a tax-smart way.