3 charitable ways to reduce your tax burden before calendar-year-end
Support your favorite charities (like Duke!) before the end of the tax year.
People say it every December and it continues to be true: This past year went by so fast! It’s hard to believe we are approaching another 12/31 and thinking once again about how to reduce taxes while supporting your favorite charities (like Duke!) before the tax year ends. Here are some ideas:
Donating publicly traded stock
It’s been a wild ride in the stock market this year, but (as of the moment I’m writing this blog post) it seems to be ending on a bit of a high note. In any event, you may own some stock that has increased significantly in value since you purchased it years ago. By donating appreciated securities that you have owned for longer than one year, you may receive an income tax deduction equal to the market value of the stock while also avoiding tax on the capital gains built-up in the donated shares. Stock gifts to Duke are generally deductible up to 30% of the donor’s adjusted gross income. Download our Gifts of Publicly-Traded Securities guide to learn more about donating stock to Duke.
Transfers from an IRA
Please remember the many potential advantages of making a transfer from a traditional (non-Roth) IRA to a public charity like Duke through a qualified charitable distribution. This strategy allows those who are 70 ½ or older to support Duke people, places, and programs with a tax-free transfer of up to $100,000 a year. While such transfers do not provide an income tax deduction, they do count toward required minimum distributions for donors who are 73+ and thus potentially reduce taxes and Medicare premiums. Due to a change in the law in 2023, you may now be able to transfer IRA assets to establish a charitable gift annuity at Duke that would provide a fixed income back to you and/or your spouse for life. For more information, download our Qualified Charitable Distribution guide.
“Stacking” charitable contributions
When completing their tax return each year, taxpayers have two choices when claiming income tax deductions: i) they can claim a standard deduction in an amount specified by the IRS each year, or ii) they can list (“itemize”) all of their individual deductions—for things like charitable gifts, state/local income taxes, and mortgage interest—total them up, and claim that sum. Of course, most folks claim whichever amount is greater.
Before 2018, many people itemized because the standard deduction was relatively low. But in 2018 Congress doubled the standard deduction so many itemizers stopped that practice and now claim the standard deduction instead.
The downside is that these taxpayers no longer get a tax benefit from their charitable giving because they’re not itemizing those deductions. But there’s a clever way to get the benefit of both charitable giving deductions and the higher standard deduction amount. It’s sometimes referred to as “stacking” deductions, but I like to think of it as “giving in advance.”
With this strategy, the taxpayer figures out all the charitable gifts she had planned to make in the next several years and donates all of those gifts in the same year. She will then be able to itemize all of those gifts together on her next tax return. This may push her total itemized deductions above the standard deduction, meaning she’ll get a tax benefit from her charitable gifts. Then, for some number of future years, she doesn’t give much (or anything) to her charities because she’s already “pre-given”, and in those years she’ll take the standard deduction.
Please consult your personal advisors on all tax and financial issues related to any charitable gift you may be considering. For more information about these and other giving ideas, please contact Duke’s Office of Gift Planning at giftplanning@duke.edu or (919) 681-0464.
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