Charitable giving can make good financial sense for retirees, both wealthy ones and those of more modest means. As retirees think about their charitable-giving strategies for 2021 and beyond, here are some key considerations.
For Smaller Givers: Take Advantage of the Deduction Available for Nonitemizers – For this year, all taxpayers who don’t itemize can deduct up to $300 on their tax returns, and married couples filing jointly can double the deduction to $600. The donation must be in cash, not property or appreciated securities. Donations into Donor Advised Funds are also excluded.
For Midsize Givers: Use Qualified Charitable Distributions – A qualified charitable distribution, or QCD, from an IRA provides another mechanism for retirees to give to charity regardless of whether they itemize or claim the standard deduction. Under a QCD, which is available once you turn age 70.5, you simply instruct the charity to steer a portion of your IRA, up to $100,000, to the charity(ies) of your choice. That donated amount avoids income tax altogether.
For Larger Givers: Donate Highly Appreciated Assets From Taxable Accounts – For retirees who have substantial non-IRA assets–taxable assets that would otherwise be subject to capital gains tax upon sale–gifting such assets to charity during your lifetime can confer multiple benefits, tax and otherwise. First and foremost, the charity receives the full benefit of the amount gifted–it won’t owe tax–and you can deduct the charitable contribution on your tax return.
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