Supporting the Arts
As the holiday season ramps up and charitable giving increases, it’s important to know that helping The Smith Center can also have a practical side.
According to Emma Durant, Smith Center director of philanthropy, making year-end charitable contributions to a nonprofit like The Smith Center can offer significant benefits for personal income tax planning.
“Holiday giving lets you support a cause you care about while also decreasing your annual tax bill,” says Durant. “The higher the income, the more a donor may enjoy a particularly large tax benefit from charitable contributions.”
To help donors make the most of their giving this year, Durant recommends several different strategies:
1 – Creating a legacy through planned giving
The Encore Society, The Smith Center’s planned giving program, gives donors the opportunity to create a lasting legacy well beyond their lifetime by supporting the center’s ongoing artistic and educational programs while maximizing current and future tax savings.
“Including The Smith Center in your estate plans ensures that our programs, performances, and educational opportunities will continue for generations to come,” says Durant, adding that there are many planned giving options, all of which can be tailored to fit a donor’s financial plans for both estate gifts or tax-saving current giving.
2 – Giving stocks to maximize tax savings
While donations made by cash or check are the most common methods of charitable giving, contributing stocks that have appreciated over time has become increasingly popular in recent years.
“Transferring stock or other appreciated assets to The Smith Center before selling can eliminate capital gains and allow a donor to receive a tax deduction for the current value,” says Durant, who explains that giving appreciated stocks that one has held for more than a year can actually be better than giving cash.
Donors who give stocks can repurchase the stock without penalty using the cash they would have given.
3 – Establishing a donor-advised fund
A donor-advised fund is a simple, turnkey tax-advantaged investment account that can be used by anyone for charitable giving. With a contribution to a nonprofit like The Smith Center through a donor-advised fund, donors receive an immediate tax deduction.
“Donor-advised funds can be a great way for charitably inclined individuals to offset a year with unexpectedly high earnings, or to address the tax implications of year‐end bonuses or stock option exercises,” says Durant.
4 – Taking advantage of CARES Act giving incentives
The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, signed into law on March 27, 2020, includes several provisions that can impact charitable year-end cash giving.
Beginning in 2020, donors who itemize their deductions can deduct up to 100% of their income instead of 60%, which Durant says offers significant tax savings for anyone able to contribute larger amounts.
“A new charitable deduction with a cap of $300 is also available for taxpayers who do not itemize their deductions, which while modest is a new benefit available to many donors,” says Durant.
The CARES Act also eliminates required minimum distributions (RMDs) from many retirement plans in 2020 and continues to allow donors who are 70 1/2 or over to contribute up to $100,000 directly to a charity without paying tax on the distribution.
As always, Durant cautions that donors should always consult with their own professional advisor before making any kind of gift.
“Our donors make everything we do possible,” says Durant. “Their commitment during this holiday season will make a big difference in helping us to continue our mission of inspiring artists, audiences and our diverse community.”