Unique challenges emerged for philanthropy in 2023:
- Federal pandemic relief programs for essential services like food, housing and healthcare ended, increasing demand for nonprofits.
- High inflation rates continued to impact both donors and nonprofits.
- Charitable giving decreased by 3.4% between 2021 and 2022, totaling $499.33 billion.
- National and international donors responded to disaster relief efforts in Ukraine, Hawai’i, Israel and elsewhere.
Still, amid economic uncertainty and inflation, San Diego Foundation (SDF) donors and partners achieved near-record giving in our fiscal year ending June 30, 2023, granting more than $130 million to over 2,500 nonprofits and contributing $205.8 million to SDF charitable funds.
As the sobering data in the SDF Economic Equity Report reveals, ongoing support is critical to address the emerging needs and inequalities in our region.
With the Giving Season upon us and IRS tax deadlines drawing nearer, we are providing seven tax-smart charitable giving strategies to close out the year.
7 Tax-Smart Charitable Giving Tips for the 2023 Giving Season
1. Give Cash
Giving cash, usually in the form of a check or wire transfer, to a nonprofit organization or your donor-advised fund (DAF) enables you to claim a tax deduction of up to 60% of your adjusted gross income (AGI) in any one year when you itemize tax deductions. You can carry forward contributions exceeding that limit for up to five subsequent tax years.
2. Donate Appreciated Securities
Direct gifts of long-term, appreciated securities, including publicly traded stock, publicly traded bonds, and mutual fund shares, to your DAF offer important advantages.
The full fair market value of your gift is deductible as a charitable contribution up to 30% of your AGI each year when you itemize deductions. You can carry forward contributions exceeding that limit for up to five subsequent tax years.
Also, 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 to donate by up to 20%.
In the example below, “Sally” has $100,000 in long-term appreciated stock, with a $10,000 cost basis.
Assuming a 35% income tax rate and a 15% long-term capital gains rate, the DAF allows Sally to avoid tax on her $90,000 gain and give more to charity ($13,500).
Conversely, if you decide to sell depreciated securities at a loss, you may choose to donate cash from the sale of those securities and claim a tax deduction of up to 60% of your AGI from your cash donation.
3. Add a Planned Gift to Your Estate Plan
Did you know that giving back can last a lifetime and beyond?
Many SDF donors revisit their estate plans with their professional advisors during Q4, which often presents an opportunity to consider establishing a planned gift during the Giving Season.
SDF legacy funds provide lasting benefits for donors, families and causes that matter.
By setting up a legacy fund, you can direct the lasting change you want to make in our region and beyond. Legacy gifts come in all shapes and sizes – and from a variety of assets, including:
The best part? If you already have a DAF with us, you can simply amend your existing fund agreement and work with us to ensure your DAF is named in your estate plan as the gift you wish to make upon your passing.
Ready to make your legacy a reality before 2023 ends?
- Set up a one-on-one consultation to discuss legacy funds
- Download our Guide to Building Your Charitable Legacy
- Call (619) 814-1332 to speak to our Giving Team
4. “Bunch” Charitable Donations
The 2017 Tax Cuts & Jobs Act nearly doubled the standard deduction for most taxpayers, which has resulted in more taxpayers opting for the standard deduction rather than itemizing, costing taxpayers the ability to write off charitable donations.
If you and/or your family fall into this category, you can still get a tax benefit by “bunching” – or doubling up – your charitable donations in 2023.
Let’s assume a couple typically donates $6,000 to charity each year and this year, they have the following expenses:
The total of these items is $25,500 — less than the $27,700 standard deduction for couples in tax year 2023. So, they claim the standard deduction and will not itemize. In other words, they will deduct $27,700 regardless of the $6,000 they donated to charity.
Instead of donating $6,000 in a single year, this couple could consider “bunching” its donations by making two $6,000 donations, for a total of $12,000 in 2023. And, make no donations next year in 2024.
Using the same example above, an additional $6,000 (totaling $31,500) would put this couple 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 over time.
5. Give a QCD from Retirement Assets
Introduced in 2006, Qualified Charitable Distributions (QCDs) help offset the Required Minimum Distribution (RMD) income tax burden from taxpayers and encourage charitable giving.
The law allows a taxpayer age 73 and up to donate up to $100,000 total to one or more charities or eligible initiatives directly from a taxable individual retirement account (IRA) instead of taking their RMD. Because RMDs typically count as ordinary income, they could push you into a higher income bracket, negatively impacting your retirement benefits and income taxes. Starting in 2023, donors can also direct a one-time, $50,000 QCD to a charitable remainder trust or charitable gift annuity as part of recently passed SECURE Act 2.0 legislation.
QCDs have become a popular way for donors to support charities while offsetting RMD income taxes.
QCDs provide many potential benefits and may be a suitable giving strategy if you:
Although QCDs cannot be gifted to DAFs, you can gift QCDs to SDF strategic initiatives. These collaborative giving opportunities allow you to partner with other donors to make a greater collective impact on the most critical needs facing San Diegans. Choose from the following initiatives:
- General Support: Advance our vision for just, equitable and resilient communities throughout the region.
- Children and Families: Provide equitable access to mental, behavioral and physical health and well-being services for children and families.
- Climate & Environment: Reduce our region’s polluting emissions, protect biodiversity, and minimize local risks from climate change.
- Education & College Access: Enable more students from underserved communities to prepare for, access and persevere through college.
- Racial & Social Justice: Support community-led efforts to address systemic racism and increase racial and social equity across San Diego.
- Workforce Development: Promote access to career training, education, internships, apprenticeships and other upskilling opportunities.
These initiatives are informed by experts in our community and led by an SDF program director who is a leading voice in San Diego on these key issues. We are in direct conversations with grassroots organizations and cross-sector partners, making these funds strategic and targeted to address the greatest needs in our community.
To learn more about these initiatives and how to give a QCD to help address these needs, contact Amenah Gulamhusein, Senior Director of Strategic Initiatives, at (619) 319-0388 or firstname.lastname@example.org.
6. Combine Tax-Loss Harvesting with a Cash Gift
In this market, you may have publicly traded securities that have declined in price below their cost basis (purchase price). If you sell those securities at a loss, capital losses can offset capital gains from better-performing securities and/or up to $3,000 of ordinary taxable income. This process is called tax-loss harvesting.
Donors who itemize their deductions can then claim a charitable deduction for donating cash from the sale proceeds. If capital losses are greater than capital gains and after reducing $3,000 of ordinary income, the net remaining loss may be carried forward to offset capital gains or ordinary income in future years.
7. Donate Complex Assets
We understand giving comes in all shapes and sizes.
In addition to publicly traded securities, SDF accepts gifts of complex assets, including real estate, business interests, privately-held stock and a broad range of other assets.
We specialize in simplifying the process of converting complex assets into charitable contributions. We accept asset gifts that many other nonprofits and commercial brokerage firms do not have the ability or the experience to accommodate.
If you have questions about donating a non-cash asset not listed, please contact us at (619) 814-1332 to or email@example.com.
Year-End Contributions and Grants
Click here to view critical dates to ensure that your 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.
This Giving Season, we are also delighted to share the first SDF Year-End Giving Guide to help you discover local nonprofit organizations you may not be familiar with, which are working to address our region’s greatest needs. Many nonprofits rely on year-end giving to serve and meet the growing needs of San Diegans. Please consider supporting these nonprofits or others serving our community this Giving Season.
Grants from your SDF fund must be made by December 21 at 12:00 p.m. to be eligible for this calendar year.
Our team is here to help you find organizations that align your priorities with impactful work in our communities. Contact our Donor Services Team at (619) 814-1332 or firstname.lastname@example.org to speak to us about year-end giving.