There are those in the stratosphere. They intentionally funnel eye-popping resources to charity. You know who I’m talking about — Warren Buffett BRK.A, +0.01%, Bill Gates, McKenzie Scott, Jeff Bezos AMZN, +0.02% and Elon Musk TSLA, +5.76% — to name a few. All grab headlines for their philanthropy.
I’m grateful they do that. We all should be.
Then there are those of us in the lower tiers who give with our hearts to causes that matter deeply to us and those we love. We don’t have billions to give away, but we do what we can. It’s who we are.
I make a few charitable donations throughout the year mostly in memory of a friend or family member who has died. My mom, for instance, passed away in August, just shy of 92. She requested donations in her memory be directed to her alma mater Chatham University’s undergraduate scholarship fund. I ponied up.
My more focused philanthropy, however, comes in December–right about now–when I begin to think of holiday gifts as well as those charities I personally contribute to and itemize as a charitable deduction for income tax purposes each calendar year. These run from my alma maters to a shelter for battered women in Washington, D.C.
What is especially fun and rewarding is also using giving as a gift choice. Several years ago, my sister and me and our spouses began substituting material presents with donations in honor of one another to the community nonprofits we support.
My sister, for instance, makes her gift for me to Sprout Therapeutic Riding and Education Center in Aldie, Va. in my honor. I send one for her to Team Up Philly, an organization dedicated to empowering girls living in underserved Philadelphia neighborhoods through participation in programs that “combine athletics, character development, fitness and nutrition education, leadership training and academic assistance. My husband asks for his “gift” donation be made to the Capital Area Food Bank.
Talk about making holiday shopping a breeze. No worries about delivery by Christmas or items being on back-order or sold out or whether you got the size right.
The tinsel topping: It’s a smart money move before the year ends. The deadline for a donation that can be deducted on your 2021 tax return is Dec. 31. And as we all know, or should know, charitable deductions lower your taxable income, helping to reduce the sum of federal income tax you pay.
The IRS wants taxpayers to make charitable contributions
Under the CARES Act, part of the federal government’s pandemic relief program, individual taxpayers who itemize in 2021 (as they did in 2020) can deduct cash charitable contributions made to certain qualifying charities of as much as 100% of their adjusted gross income. It was previously 60%.
You may also be able to claim charitable contributions for 2021 even if you take the standard deduction–$12,550 for singles; $25,100 for married couples filing jointly. The standard deduction is the amount you can subtract from your income, with no documentation required.
Until the temporary 2020 measure, people who chose to take the standard deduction couldn’t claim a deduction for their individual charitable contributions. Now the provisions of the Act have been extended one more year.
Taxpayers can take a special deduction of up to $300 for cash donations made in 2021 when they file their tax return in the spring, even if they don’t itemize on their income tax return. The deduction reduces, by up to $300, your adjusted gross income. Married couples filing jointly, who aren’t itemizing, will be allowed to take a deduction of up to $600 in cash contributions to charity this year. It was limited to $300 last year.
To qualify for the deduction, the donation must be made in cash—giving by check or credit card is OK. The contribution must be made to a qualified, 501(c) (3) public charity. The IRS offers a search tool to check if your donation is tax-deductible.
You can find more information about the rules and limits for itemizing charitable donations in IRS Publication 526, Charitable Contributions.
No matter what charities you select to contribute as part of your holiday and year-end giving, here are six things to keep in mind.
- Do some soul searching to decide if the organizations are aligned with your values even if it’s a gift.
- You might not be Melinda French Gates but take pride in your giving regardless of the zeros involved. You’re a philanthropist, too. That mind-set helps you view yourself as working to make an impact on the causes that matter to you over time. It’s the long game. You can be mindful and set goals for your giving.
- Every little bit counts. Your modest donation may help a charity qualify for matching funds. I received a letter today from Animal Friends, an animal rescue charity in Pittsburgh that I donate to in memory of my brother Jack each December, with the great news that every gift will be matched up to $100,000 by a local animal lover, Jennifer Maitland, through Dec. 31 at midnight. And check and see if your employer matches charitable gifts you make. If it does, you can double your donations.
- To check if a nonprofit has a good track record, try websites like Charity Navigator and Charity Watch.
- Keep records if you plan to report your charitable contributions on your tax return. Get a receipt or written letter from the charity documenting the donation. and retain a canceled check or credit card receipt. A written acknowledgment is required for donations of $250 or more.
- There are loads of charitable giving strategies that you can consider when you have more time to plan your philanthropic road map. You can, for example, donate appreciated stock and other assets; make a qualified charitable distribution from individual retirement accounts; or group contributions into a donor-advised fund. You get an immediate tax deduction for your donation (whether you’re giving away cash, securities, or other assets) and then allot grants of that money later to a various charities. The big players in the donor-advised fund field include Fidelity Charitable, Vanguard Charitable and Schwab Charitable.
The astonishing thing about giving is that whether you have $100 million or $100 to donate, it lifts you in a way few things in life do. Generosity nourishes the human spirit.
After I donated to my mom’s college’s fund as she requested in her will, I received a handwritten thank you note from a young lady named Sophia from the class of ’25. “I am a first year studying criminology here at Chatham,” she wrote. “Thank you for helping make my experience at Chatham possible!” I keep the note pinned on the wall by my desk next to a photo of mom and my brother Jack…smiling.
by Kerry Hannon
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