Tax Efficient Ways For Women To Give in 2021
As a working mother, there are lists that we write in our minds to prepare ourselves for the holidays even before school has begun. If giving is a part of your holiday tradition, this is one task that you can accomplish far in advance of the frenzy that comes with the season.
Women are quickly becoming a more important force in philanthropy. The Lilly Family School of Philanthropy at Indiana University revealed three interesting trends in its 2015 report “Do Women Give More?”:
- Single women are more likely to make charitable gifts than their single male counterparts.
- As women’s incomes rise, we are also more likely to give to charity than men.
- Regardless of gender, being married also increases the amount and the likelihood of giving.
Charity Begins at Home
Sharing the gift of giving is a wonderful way to connect with loved ones, to teach your daughters (and sons) about the spirit of charitable giving. Teaching the next generation about the importance of philanthropy is certainly a gift to be cherished.
If you’d like to share this gift with a daughter, sister, niece, or loved one in your life, we have included a list of some of our favorite organizations that focus on women’s needs below. We encourage you to seek out organizations in your neighborhood to help spread the joy of giving.
- Washington Area Women’s Foundation
- Women & Girls Fund of the Mid-Shore
- Girls on the Run
- Anne Arundel Women Giving Together
During a year marred by a global pandemic, the spirit of charitable giving in the United States was alive and well in 2020. Charitable gifts rose 5% to a record $471 billion last year, with individuals and foundations leading the way.
While 2021 continues to be a year of recovery in many ways, many of us will spend next week with our families and loved ones to give thanks. Giving Tuesday has become a tradition celebrated by many following the Thanksgiving holiday to encourage those to reach beyond their homes to help others in need. We’ve compiled a list of charitable giving strategies below that we hope will help you get into the spirit of giving this season.
Donation of Appreciated Stock
With the market at all-time highs, this might be a great time to consider a donation of appreciated stock to your favorite charitable organizations. Just remember, that donations should be limited to shares held for a year or longer. This giving strategy not only increases the amount of your gift but could also be more tax efficient, allowing you to avoid capital gains taxes incurred by selling appreciated stock. This is a top giving approach for those who itemize deductions on their tax returns.
Qualified Charitable Distributions
Regardless of whether you itemize or claim the standard deduction on your tax return, you might consider a Qualified Charitable Distribution (QCD) if you are 70.5 years or older by making a donation directly from your IRA. Individuals may make up to $100,000 in QCDs even before they are required to take distributions from their retirement account. Keep in mind that donations to donor advised funds and private foundations are not eligible recipients of QCDs.
Lumping Your Gifts
If you find that you are not able to get “credit” on your tax return for your charitable gift due to a higher standard deduction, ($12,550 per person or $25,100 in 2021) , you might consider “lumping” gifts that you would normally give over multiple years into a single tax year. This “lumping” strategy might allow someone who would not otherwise be eligible to itemize their deductions through normal gifting to do so, giving them “credit” to deduct those gifts from their taxable income. This strategy has given way to more interest in recent years to funding donor advised funds from which gifts may be made over many years into the future.
Gifts of long-term appreciated stock to a donor advised fund may also be used to increase the tax efficiency of your gift. For those high-income earners nearing retirement, this could be a great way to reduce your taxable income at a time when your taxable income is high, while building a source of funds to give during your retirement years.
Keep in mind that you may also “lump” your deductions directly to qualified charitable organizations in a single tax year and “carry over” the excess permitted for up to five years if your gifts exceed the amounts permitted by the IRS.
Special CARES Act Provisions
In addition to the expanded deduction for cash contributions up to 100% of your AGI, you might also consider taking advantage of another CARES Act provision. If do not itemize your taxes, you may claim a special “above-the-line” tax deduction of up to $300 per person ($600 if filing jointly). Keep in mind that if you itemize your taxes (you have deductions of $12,550 or more for single tax payers and $25,100 for joint filers), you may not also take advantage of this additional CARES Act deduction.
Understanding the timing and application of which strategies will maximize your own particular tax filing situation is important. We highly recommend speaking with a CERTIFIED FINANCIAL PLANNER™ professional and your tax advisor about how these strategies might apply to your individual planned giving strategy.
About the Author
Jane DeLashmutt O’Mara, CFP® brings more than a decade of experience working in financial services to her practice. Jane believes that client education and compassion are vital to the financial planning process. Whether she’s working with a client to plan for retirement or navigate a major milestone such as marriage, divorce, or loss of a loved one, she enjoys educating and empowering her clients. Jane also enjoys working with families with unique or complex estate planning needs. Contact her by calling 410-822-0813 or email firstname.lastname@example.org.
Important Disclosures: All opinions expressed in this newsletter are not intended to be a guarantee or forecast of future events, do not constitute a solicitation to buy or sell securities nor are they a complete description of our investment policy, the markets, an investing strategy or any securities referred to in the newsletter. Opinions expressed herein are not intended to be used as investment advice and are subject to change without notice based on market and other conditions. Different types of investments involve varying degrees of risk, and there is no assurance that any specific investment will either be suitable or profitable for a client's or prospective client's investment portfolio, and no one should assume that any information presented here serves as the receipt of, or a substitute for, personalized individual advice from FBB Capital Partners, its research team or its portfolio managers. The value of investments and the income from them may fluctuate and can fall as well as rise.