9/6/2023
Supporting the Arts
With the upcoming holiday season and the subsequent increase in charitable giving, it’s important to know that helping The Smith Center can also have a practical side.
According to Emma Medas, The Smith Center’s Vice President 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 Medas. “The higher the income, the more a donor may enjoy a particularly large tax benefit from their charitable contributions.”
To help donors make the most of their giving this year,Medas 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 Medas, 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 Medas, 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 Medas.
4 – Taking Advantage of IRA Distribution Incentives
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act), signed into law in late 2019, includes provisions that can impact charitable year-end giving for older individuals. Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking Required Minimum Distributions (RMD) to age 73. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024. If you reach age 73 in 2023, you were 72 in 2022 and subject to the age 72 RMD rule in effect for 2022. If you reach age 72 in 2022,
- Your first RMD is due by April 1, 2023, based on your account balance on December 31, 2021, and
- Your second RMD is due by December 31, 2023, based on your account balance on December 31, 2022.
For community members who make a donation directly from an Individual Retirement Account (IRA) to a qualified charity, their gift will be excluded from taxable income, unlike other IRA withdrawals. This kind of gift, called a Qualified Charitable Distribution (QCD), will also count toward the individual’s required minimum distributions from the IRA for that year.
A QCD can offer a variety of benefits. For instance, lowering a senior’s taxable income can reduce the impact to certain tax credits and deductions, such as Social Security and Medicare. QCDs also don’t require itemization.
NEXT STEPS
Next Steps
As always, Medas 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 Medas. “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.”
To learn more about making donations to The Smith Center, a nonprofit organization, CLICK HERE.