As the end of 2022 draws near, we want to remind you of tax-advantageous ways to donate to your favorite charities this holiday season.
Donating stock allows you to avoid capital gains taxes. For example, if you bought a share of Apple for $100 and sold it five years later for $300 your capital gain on that share is $200. Instead of selling the share and being taxed upwards of 20%, you can donate that share to your favorite charity and neither you nor the charity will pay taxes on that money. You can also deduct the full fair market value at the time of the gift from your taxable income if you are itemizing your deductions, lowering your total taxable income.
Don’t want to change your stock portfolio? Donate shares of the appreciated stock, then repurchase the same number of shares immediately after. This eliminates the capital gains on your previous shares and resets your “cost basis” to the current price, possibly saving even more taxes when you sell the new shares in the future.
Qualified Charitable Distribution (QCD):
You are required to begin drawing from your traditional IRA at age 72, and those distributions are taxed at ordinary income tax rates. Your annual income is then boosted, potentially bumping you into a higher tax bracket. The QCD rule allows you to donate those distributions to a charity and deduct the donation from your total taxable income. To make a QCD, contact your IRA custodian and let them know that you’d like to donate some or all your IRA distributions to the charity of your choice and they will cut the check from your account to your designated charity!
Bunching Charitable Gifts:
The standard deduction is $25,900 for joint filers, $19,400 for heads of household, and $12,950 for single filers and those married filing separately. That means that unless your deductions exceed your respective level, there is no advantage to itemizing deductions. If you find yourself close to the threshold, bunching your gifts could be beneficial to you. For example, if you are single and donate $10,000 a year to Urban Homeworks, you don’t exceed the standard deduction. However, if you decide to donate $10,000 on January 1 and $10,000 on December 31 in the same year, your deductions would be $20,000 surpassing the standard deduction threshold, making it advantageous to itemize your deductions and lowering your taxable income.
Donating to Urban Homeworks:
We would love for you to consider donating to Urban Homeworks using these methods this year! To the right you will find the information needed to make a stock or bond transfer.
Important: Gifts of stocks are typically transferred without information that identifies the donor. Please notify Urban Homeworks of your gift to ensure you are properly thanked and receipted for tax purposes. Contact Emily Lassiter, Senior Development Officer, at 612-429-0374 or EmilyL@urbanhomeworks.org.