The whole Covid experience has somehow warped time for me. It feels like just a few weeks ago my wife and I were hiking through Glacier National Park on one of the hottest days on record, and now it’s nearly Thanksgiving. It’s hard to believe we are now in the fourth quarter of 2021, but the chill in the air and fading daylight are sure signs the year-end will be here before we know it. The year-end holiday season is always the big charitable giving season, and many nonprofits depend on strong support during this time.
As I mentioned in my August column, overall charitable giving increased 3.8 percent in 2020 and totaled $471.44 Billion. This was great news that even during a pandemic and the shutdown of the economy resulting in the loss of 9.6 million jobs, our fellow citizens continued their tradition of generosity. And individual giving leads the way comprising 78 percent of total giving.
There has been a concerning trend identified regarding charitable giving. A study conducted by the Indiana University Lilly School of Philanthropy found that the percent of households making charitable gifts has dropped over time from two-thirds of households to under half. The declines have been especially steep with middle- and low-income donors. Strong contributions from wealthy households have helped overall, giving rise to 88 percent of affluent households donating in 2020.
A group of the nation’s largest foundations (including the Kauffman Foundation) and other philanthropy leaders have recently announced the public kickoff of a campaign to drive greater giving of time and money, especially among middle-and low-income Americans. The Generosity Commission created by this group has plans to “build broad national momentum and bipartisan congressional support for positive change to reimagine generosity across America.” Their timeline is by the fall of 2023 to offer its final recommendations. As I hear updates, I plan on sharing those in future columns.
The Truman Heartland Community Foundation has the privilege of supporting the charitable giving of some of our community’s most generous people. And many of them would not be classified as “wealthy.” You can establish a Donor Advised Fund (DAF) with a $5,000 contribution. Having a DAF enables you to use cash and other assets to support your charitable giving, enabling you to give more to your favorite charities and causes.
Now is a great time to start planning your year-end charitable giving. As you do, here are a few things to keep in mind. If you have an IRA and are over age 70 ½, making a Qualified Charitable Distribution (QCD) from your IRA directly to a charity is a tax-wise way to give. Required Minimum Distributions (RMD) were put on hold in 2020 but are required again in 2021. A QCD will count towards your RMD, and you won’t pay taxes on the withdrawal.
Due to the CARES Act, individuals who take the standard tax deduction can deduct up to $300 in charitable giving in 2021, and married couples who file joint returns can deduct up to $600. This is a significant change, as, before the CARES Act, taxpayers who take the standard deduction could not take any deductions for charitable gifts. We hope this provision will be made permanent, but it currently expires at year-end. I am sure it is one of those changes the Generosity Commission will be promoting.
Most people cannot itemize and take the standard deduction on their tax returns with the higher standard deduction. Charitable bunching utilizing your DAF may be a good strategy. By bunching several years of charitable giving in one year and putting that gift in your DAF, you can exceed the standard deduction and see some tax savings result from your charitable giving. You then continue supporting your favorite charities through grants from your DAF for several years while taking the standard deduction.
The clock is ticking. Don’t let the time-warp get you, or you may blink, and it will be spring, and you will have missed the opportunity to create positive change through your thoughtful giving. I hope you will take a few minutes to develop your plan, and please continue to be generous. We have lots of great organizations in our community that are counting on our support.