4 Ways to Maximize Your Charitable Giving Deductions Before 2021 Ends

Despite the challenges and crises the past 21 months have presented – from the pandemic to social justice to natural disasters – philanthropists have continued to respond at unprecedented levels.

In 2020, individuals, bequests, foundations and corporations gave an estimated $471.44 billion to U.S. charities, a 5.1 percent increase compared to 2019, according to the Giving USA 2021 Annual Report.

The San Diego Foundation donors met the challenge, too. During our fiscal year ending June 30, 2021, donors, fundholders and partners granted a record-breaking $104.1 million to nearly 2,000 nonprofits, a 34 percent increase compared to fiscal year 2020.

We could not be more honored to partner with you in your philanthropy, as your generosity inspires time and time again.

With the giving season upon us, here are four ways donors can take advantage of this year’s favorable giving environment before 2021 ends.

What’s Favorable about 2021?

Although the stock market has been volatile in 2021, the S&P 500 Index has hit record highs. And between 2016 and 2021, the S&P 500 has roughly doubled, which means you may have highly appreciated securities in your portfolio(s).

Existing tax laws offer incentives to donors who contribute appreciated non-cash assets held more than one year.

2021 is also unique because several 2020 CARES Act provisions have been extended into this year, which can boost your charitable tax deductions.

Most significantly, the charitable giving deduction limit remains increased to 100 percent (previously 60 percent) of Adjusted Gross Income (AGI) on cash donations for individuals who itemize. The AGI limit also remains at 25 percent of taxable income for corporations (previously 10 percent).

Federal law does not permit donor-advised funds to accept gifts afforded by CARES Act charitable deductions in 2021. However, you can support The San Diego Foundation programs and funds to help realize our vision of just, equitable and resilient communities in San Diego.

4 Ways to Maximize Your Impact in 2021

1. Donate Appreciated Securities

Giving stocks, fund shares, mutual funds and other appreciated securities directly to your donor-advised fund is a win-win and one of the most effective ways to maximize your philanthropic impact.

By donating appreciated stock held for more than one year directly to your fund, you eliminate the capital gains tax you would incur if you sold the assets and donated the after-tax proceeds, which could increase your amount available for charity by up to 20 percent.

You can claim a fair market value charitable deduction for the 2021 tax year and choose to pass on that savings in the form of more giving.

In the example below, this individual has $100,000 in long-term appreciated stock, with a $10,000 cost basis.

Assuming a 35 percent income tax rate and a 15 percent long-term capital gains rate, the donor-advised fund allows this philanthropist to avoid tax on his $90,000 gain and give more to charity ($13,500).

	Individual Sells Securities and Donates After-Tax Proceeds	Individual Contributes Appreciated Securities Directly to Charity
Cost Basis	$10,000	$10,000
Value of Appreciated Securities	$100,000	$100,000
Capital Gains Tax	$13,500	$0
Net Available to Charity	$86,500	$100,000

2. “Bunch” Charitable Donations

The 2017 Tax Cuts & Jobs Act nearly doubled the standard deduction for most taxpayers. The increase resulted in more taxpayers opting for the standard deduction rather than itemizing, costing taxpayers the ability to write off charitable donations.

What can you do in order to continue to get a tax benefit for your charitable good nature? Consider “bunching” your charitable donations.

Let’s assume a couple typically donates $4,000 to charity each year and in 2021, they have the following expenses:

• $10,000 state and local taxes
• $6,000 home mortgage interest
• $3,500 medical expenses (the amount over 10 percent of adjusted gross income)
• $4,000 charitable donations

The total of these items is $23,500 — less than the $25,100 standard deduction for couples in tax year 2021. So, they claim the standard deduction and will not itemize. In other words, they will deduct $25,100 regardless of the $4,000 they donated to charity.

Instead of donating $4,000 in a single year, this couple could consider “bunching” its donations by making two $4,000 donations, for a total of $8,000 in 2021. And, make no donations next year in 2022. Using the same example above, an additional $4,000 would put them over the standard deduction and they would itemize. Next year, they might not itemize.

The same “bunching” strategy would be repeated every other year. Only the timing of the donations changes. The amount of support stays the same.

3. Give a Qualified Charitable Distribution (QCD) from Retirement Assets

Introduced in 2006, QCDs help offset the required minimum distribution (RMD) income tax burden from taxpayers and encourage charitable giving.

The law allows a taxpayer over age 72 to donate up to $100,000 total to one or more charities directly from a taxable individual retirement account (IRA) instead of taking their RMD. As a result, you may avoid being pushed into higher income tax brackets and prevent phaseouts of other tax deductions.

QCDs provide many potential benefits and may be a suitable giving strategy if you:

• Are required to take an RMD from an IRA, but don’t need the funds and want to give them to charity
• Have fewer itemized deductions, including your potential IRA RMD gift, than the standard deduction, so that you wouldn’t be able to deduct the RMD gift
• Would like to reduce the balance of an IRA to lower future RMDs
• Would like to make a larger tax-deductible charitable gift than you could if you simply donated cash or other assets. The AGI-based deduction limit does not apply to QCDs, allowing you to make larger gifts that are income tax-free.

Although federal law does not permit donor-advised funds to accept QCDs, a gift of this type does represent an opportunity for donors to support scholarship, field-of-interest or donor-designated funds, including programs and funds at The San Diego Foundation.

4. Revisit Your Estate Plan

In addition to the continued uncertainty around the future estate taxes, the fear of mortality during the COVID-19 pandemic has led to an escalation in estate planning questions and discussions across the industry. Many donors are in the process of revisiting their estate plan with their professional and wealth advisors during the giving season.

This presents an important opportunity for donors like you to evaluate your charitable goals and the causes or organizations you plan to support through your legacy giving.

2021 Year-End Giving Guidelines

As you continue to look for ways to help San Diegans in need and support causes you care about, be sure to contact our Donor Services Team at (619) 814-1332 or donorservices@sdfoundation.org to speak to us about your year-end giving needs.

Refer to the critical dates below to ensure that contributions and grant recommendations are received and processed by December 31, the IRS deadline for yearly tax deduction eligibility. For some assets, these dates fall in November.

Contributions

Contribution Type	Action Needed	Timing
Mutual Fund	Call Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.	Mutual fund donations must arrive to The Foundation by November 22.
Stock*	Submit a Stock Contribution Form. Call Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.	Stock donations must arrive to The Foundation brokerage accounts by December 29 at 1:00pm.
Credit Card	Login to your MyTSDF account. Click on “Give to My Fund” and follow instructions. Or Call (619) 235-2300 to contribute to your fund with your credit card. Credit card processing fees will apply.	Credit card donations must be processed by The Foundation by December 30 at 12:00pm.
Check	Mail to: Attn: Donations The San Diego Foundation 2508 Historic Decatur Road, Suite 200 San Diego, CA 92106 Please write your fund name and number in the memo field of your check. Make the check payable to The San Diego Foundation.	Mail must be postmarked by the U.S. Post Office by December 31.
Electronic Bank Transfer	Login to your MyTSDF account. Click on “Give to My Fund” and follow instructions. Or Call (619) 235-2300 to set up an electronic bank transfer to your fund.	Funds must be received by December 31.
Wire Transfer	Call Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.	Funds must be received by December 31.

Grantmaking

Contribution Type	Action Needed	Timing
Grants	Login to your MyTSDF account. Click on “Recommend Grant” and follow instructions. Or Call Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.	Grants guaranteed to be postmarked before December 31 must be received by December 23 at 12:00pm.

*As of February 15, 2021, Northern Trust became The San Diego Foundation’s broker for gifts of appreciated securities, gifts of stock and exchange-traded funds (ETFs). When facilitating a transaction, please provide the following Depository Trust Company (DTC) wire instructions and information to your broker:

• Depository Trust Company
• FBO The Northern Trust Company
• Participant Number 2669
• Reference Account 44-98583
• Your Name
• Trust Name, if applicable – required for TSDF to accept gifts from a trust
• Your San Diego Foundation Fund Name or Number

For gifts of mutual funds, please contact Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.