New Tax Rules Make Charitable Giving Easier and Cost-Effective

December 16, 2021

In a year when so many people need help, the COVID-19 stimulus act, CARES, gives donors new tax benefits for giving back.

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If the COVID-19 pandemic has taught us anything, it is the power of resilience, personal sacrifice, kindness and giving back. The health workers who have put their lives on the line to help others survive the deadly coronavirus. The teachers who've risked their health to go back to the classroom so children who are the pandemic's hidden victims can learn. Individuals whose unsung, private yet no less impactful acts of kindness have brought hope to friends, family members, even strangers. As we look back on year two of a pandemic that continues to claim lives and pose unprecedented challenges, these acts are things we can all be grateful for. 

Your donations to UNICEF helped empower the millions of people who took just such actions. As UNICEF continues to play a pivotal part in procuring and delivering hundreds of millions more COVID-19 vaccines around the world in the coming months, your support can make a groundbreaking difference. And, thanks to the extension of a special tax break approved by Congress with the passing of the CARES Act, a coronavirus relief bill signed into law in March 2020, your charitable deductions continue to be a cost-effective way to do good. 

How does it work? Those who take the standard deduction — $12,550 for people who file individually and $25,100 for married couples who file joint returns — can also deduct their charitable contributions. Individuals can deduct up to $300 in donations made before the end of 2021. Married couples can take a deduction of up to $600. To qualify, the donation must be made in cash, by credit card or by check. 

Donors who have more to give can do so and save money, too 

When the Tax Cut and Jobs Act (TCJA) passed in 2017, taxpayers had to rethink their charitable giving. With the standard deduction for individuals and married couples nearly doubled, it became harder for taxpayers who do itemize to clear the higher deductible thresholds. And the 60 percent limit on deductions from adjusted gross income curtailed charitable giving. 

Well, that's now changed. Taxpayers who itemize on Schedule A can deduct up to 100 percent of their adjusted gross income.   

This is a significant opportunity for donors and the charities they support. Just make sure the organization you wish to support is eligible to accept tax-deductible donations. This I.R.S. search tool can help donors decide which charity is best to donate to.

As we've seen over the past few years, changing tax laws necessitate new strategies for donating to causes you believe in and getting a tax break, too.

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

How to make charitable giving work for you:  

  • Take advantage of the CARES Act rules

  • Bunch your donations

  • Investigate donor-advised funds

  • Give stocks and bonds

  • Work your IRA

  • Calculate the tangible and intangible impact of your giving 

  • Seek qualified professional advice

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 many deductions people used to take were eliminated, like mortgage interest over a certain amount, state and local income tax and personal exemptions.

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 and getting the tax advantages that itemizing can bring. Another benefit: Your donations are invested, so your deposits can grow tax-free. According to the National Philanthropic Trust, "DAFs can reduce tax burdens after a windfall situation, such as receiving an inheritance, selling a business or experiencing strong market returns. You can take an immediate tax deduction when you make a charitable contribution to your DAF, reducing your tax liability."

These benefits have made donor-advised funds increasingly popular and child rights organizations like UNICEF USA and other charities are reaping the benefits. According to National Philanthropic Trust’s 2020 annual report, the number of DAF grants rose 43 percent and the dollar amount donated increased 69 percent over the previous year.  

According to NPT, 2020 will be remembered for its complex challenges, including a global health pandemic, an accelerated fight for social and racial justice and a polarized political environment. But at NTP it will also be remembered as "a time when our donors made unprecedented commitments to charitable causes and organizations. They used their NPT donor-advised funds to address these problems and more, recommending record-breaking grant dollars to charities whose missions they actively wish to support." 

Give stocks and bonds 

Appreciated securities are another cost-effective way to make a charitable gift, especially for investors whose stock market wins have set them up for the potential of high capital gains. When you transfer ownership of long-term holdings to UNICEF USA, for example, you receive a charitable deduction for their full market value — and you 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 calling Probyn Cope at 212.922.2470.

For taxpayers 70½ or over: Work that IRA

If you are 70½ or older, you can make donations up to $100,000 from your IRA accounts without paying taxes on the funds you withdraw. Your required minimum distributions that would have been taxed as income can be directed to charity tax-free. Since the gift doesn’t count as income, it can also reduce your annual income level. This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax. Just be aware that if you take advantage of this strategy, you will not receive a federal charitable income tax deduction. To learn how to do an IRA rollover, click here

To find out if any of these strategies are appropriate for you, consult your tax advisor. But make sure to get the ball rolling soon so you'll have plenty of time to take advantage of these options before the end of the year.

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 report released by Fidelity Charitable, 48 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 vaccinate the world against COVID-19 and protect children from the pandemic's devastating fallout make giving to UNICEF now more important than ever.

  • UNICEF is playing a crucial role in the UN-wide mission to end the pandemic, the procurement and delivery of COVID-19 vaccine doses through the COVAX facility, the largest vaccination campaign in history. UNICEF also procures and transports immunization supplies such as syringes, safety boxes for their disposal, and cold chain equipment such as vaccine refrigerators. Throughout the pandemic, UNICEF has ensured the safety of the public and health workers through education, advocacy and delivery of PPE, oxygen concentrators and other supplies.

  • In Yemen, six years of war and the impact of the coronavirus pandemic have left 2 million children under age 5 acutely malnourished. A shocking 10,000 children have been killed or maimed since the fighting started in March of 2015. The protracted armed conflict has left the nation in ruins and 70 percent of the total population, including 11.3 million children, in need of humanitarian assistance. Your donations can help avert a disaster for Yemen's children and empower UNICEF to reach every child in need.

  • In the Syrian Arab Republic, children continue to bear the brunt of the 11-year-old conflict. Over 13.4 million people (6.1 million children) require assistance and 7 million people are internally displaced, among them 3 million children. Humanitarian needs have increased by over 25 percent since 2020, driven by an economic crisis, continuing violence in the northwest and other parts of Syria Arab Republic, hostilities, mass displacement, devastated public services and COVID-19. 

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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Are you interested in sponsoring a child? Learn how you can save and protect every child with UNICEF.

Top photo: Rafi, 3, holds a box of winter clothing that his family received from a distribution at Kawergosk Syrian Refugee Camp in Erbil Governate in the Kurdistan Region of Iraq. © UNICEF/UN042749/Khuzaie