2023 Tax Rules and Tips for Easier, Cost-Effective Charitable Giving

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It's during the holiday season that people in the U.S. typically make roughly one-third of their annual donations to charity, moved by both generosity and the December 31 deadline for securing tax deductions.

Those generous gifts are needed more than ever — all throughout the year. Climate change, armed conflict and economies in free-fall are taking a disastrous toll on children. From flooding in Pakistan to severe drought in the Horn of Africa, from war in Ukraine to escalating civil unrest in Burkina Faso, the need for humanitarian relief has become ever more urgent.

Still, rising inflation and stock market and cryptocurrency losses may make some people feel they have less to give. And as we've seen over the past few years, changing tax laws necessitate new strategies. Rules enacted as part of the COVID-19 relief legislation, which allowed people to deduct 100 percent of their adjusted gross income (AGI) for cash donations in 2020 and 2021, have expired. The new threshold is 60 percent of AGI for cash contributions held for over a year, and 30 percent of AGI for non-cash assets.

The good news is that the standard deduction is now higher to account for inflation, rising to $12,950 for people who file individually and $25,900 for married couples who file joint returns. Those choosing not to itemize can still deduct their charitable gifts, with individual filers allowed $300 in donations, and married couples, up to $600. 

What's even better is that the impact of economic uncertainty and global emergencies has made donors surveyed by Fidelity Charitable, a nonprofit that facilitates charitable giving via investment accounts called donor advised funds, more determined to give back. Nearly 75 percent of respondents said they were concerned for their neighbors and community; roughly 64 percent cited concerns over how the threat of recession would impact nonprofits' ability to meet these challenges. As a result, nearly 59 percent of donors surveyed last summer were planning to give more.

If you find yourself in the same boat or feel uncertain about how much you can afford, there are many ways to make charitable gifts work for causes you believe in — and your tax returns. 

Here is some advice from experts and trusted sources that can help you do both:

Donor-advised funds — flexible, easy to manage, convenient

The Tax Cut and Jobs Act passed in 2017 required taxpayers to have more itemized expenses to make foregoing the higher standard deduction worth it. Itemizing can be tough, and with a $10,000 cap on allowable deductions for state, local and property tax that went into effect in 2018, many people don't see the point.

One solution many donors have used is to “bunch” years' worth of charitable donations into one by setting up a donor-advised fund (DAF). From a donor-advised fund you can make yearly grants to nonprofit organizations as long as they are an IRS-qualified 501(c)(3) charity. 

Donor-advised funds — investment accounts consisting of cash, securities or appreciated assets — are offered by many financial institutions, including Schwab, Fidelity and Vanguard, to name a few. DAFs are a great way to keep giving — your donations can be made over a period of years — and getting the tax advantages that itemizing can bring. Another benefit: Your donations are invested, so your deposits can grow tax-free.

Bunching can also allow donors to have a greater impact for good. According to Charles Schwab, that strategy can also provide tax payers a more sizable two-year deduction than if they made two annual consecutive gifts. For more information, seek the advice of an accountant to learn about whether your income level, filing status and how much you give factors in.

According to the National Philanthropic Trust (NPT), grants from DAFs to charities rose more than 60 percent in the past two years — and over 400 percent over the past 10 years. What's more, observed NPT, those who have DAFs tend to be quick to give and give generously. 

For more information about how to support UNICEFF USA via a DAF, please click here. 

Give stocks and bonds 

Appreciated securities are another cost-effective way to make a charitable gift. When you transfer ownership of long-term holdings to UNICEF USA, you receive a charitable deduction for their full market value but incur no capital gains tax (subject to IRS deduction limits).

Learn more at this link and get assistance with making your gift by emailing stockgiving@unicefusa.org or contacting Neeta Gan at (866) 486-4233.

For taxpayers 70½ or over: Work that IRA

As of 2023, you now have two choices available to you.

As in year's past, you can make a donation from your IRA accounts without paying taxes on the funds you direct to charity (qualified charitable distribution or QCD). Your required minimum distribution that would have been taxed as income can be directed to charity tax-free, which can reduce your annual income level. 

New in 2023, you can make a one-time distribution of up to $50,000 from your IRA to fund a charitable gift annuity. You will receive a lifetime payment and similar to the QCD, you will not be taxed on the funds you transfer to charity. 

Just be aware that if you take advantage of either strategy, you will not receive a federal charitable income tax deduction.

To learn how to do an IRA rollover, click here — but always consult your tax advisor to find out if any of these strategies are appropriate for you.

Invest in the happiness of children — including your own

While this may qualify more as life — not tax — advice, involving children in giving back is an effective tool for producing future happiness. According to a  study released by Fidelity Charitable, 45 percent of people who experienced strong giving traditions as children go on to donate $5,000 or more annually to charity — and consider themselves to be very happy adults!

And if your cause is the well-being of children, the race to protect children from war, climate change and the COVID-19 pandemic's devastating fallout makes giving to UNICEF more important than ever.

• War in Ukraine has forced over 14 million people out of their homes since February 2022, triggering the fastest escalating refugee crisis since World War II. Since then, UNICEF has rushed emergency medical supplies to hospitals and neonatal care centers, worked with UNHCR to establish 40 Blue Dot safe spaces in seven nations to coordinate child protection services and helped traumatized children resume their childhoods through learning and emotional support services.
   
• A climate disaster impacted at least 33 million people in Pakistan after record monsoon rains and flooding left one-third of the country underwater in mid 2022. Abdullah Fadil, UNICEF Representative in Pakistan, called the disaster a "calamity of biblical proportions;"  more than 2 million homes were destroyed, leaving families without shelter or livelihoods. 
  
  UNICEF launched a rapid response, sending in humanitarian supplies and safe water and organizing temporary learning centers and sanitation and health facilities. As winter set in, UNICEF rushed warm clothing, blankets and other essentials to help protect children from the cold.
   
• Four consecutive failed rainy seasons in parts of Ethiopia, Kenya and Somalia have devastated the Horn of Africa. People have no way to earn a living, making every day a desperate bid for survival. UNICEF is on the ground throughout the region, working to reach severely malnourished children with Ready-to-Use Therapeutic Food (RUTF), rehabilitate water systems and enact long-range plans to protect children and families from future disasters by making the region's systems more climate-resilient.

Please help UNICEF continue all this important work and give the world's most vulnerable children the healthy, happy and safe childhoods they deserve. 

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Learn more about how UNICEF is working to create a more equitable world for every child.