[Guest Author: Tiffany House, CAP®, CEPA, FCEP of Gift Planning Institute, Maricopa Community College Foundation Consultant]
#1 - Utilize the Arizona State Tax Credit!
If you pay Arizona State Income Tax, you can receive a dollar-for-dollar tax credit for gifts to qualifying charities! That means rather than pay Arizona state taxes, you could allocate those funds to a cause you care about! (This is not a deduction- it is a Tax Credit!)
There are four different categories of qualified charities that can benefit from your State Tax dollars, and you can get over a $4,500 (married) dollar for dollar TAX CREDIT.
Go to to learn more and find a list of qualifying charities. Or you can contact Tiffany to help you find charities.
#2 - Check Out the Fastest Growing Gift Planning Tool!
Gifting from an IRA through a Qualified Charitable Distribution (QCD) has been expanding by over 50% year over year because it is one of the most tax efficient ways to give. If you are 70.5 or older, you can give up to $100,000 from your IRA to charity and not have to collect your Required Minimum Distributions. IRA distributions are taxed as ordinary income and can affect taxes on social security and Medicare benefits. Unlike other estate assets that get a step up in basis and are not taxable to the next generation, IRAs are taxed as income to heirs.
Talk to your advisor to see if a QCD is a good strategy for you or for your parents. Or if you are concerned that you will need the assets in your IRA, name your favorite charity as a beneficiary and leave more tax efficient assets to heirs.
#3 - Portfolio Rebalance?
The soaring stock market causes portfolios to be unbalanced when stocks gain significant value. This can leave an investment portfolio heavy in stocks, allocating a smaller portion of the portfolio to other asset classes often designed to mitigate risk. If there is a correction on the horizon, it could leave some portfolios at a greater risk of stock value loss if a higher percentage of the portfolio is in stocks. It is a wise time to rebalance your portfolio.
Gifting highly appreciated stock to your favorite nonprofit can help you diversify your portfolio, and you will get the same tax deduction as if you gave cash. Plus, you will not have to pay the capital gains tax on the growth of the stock, and because a nonprofit is tax exempt, they won’t have to pay the taxes!
#4 - Tax Ambiguity Motivated Assets Sales in 2021.
With all the proposed tax law changes, many people were concerned about higher taxes in the future and sold property, business interests and other assets in 2021. Now they are concerned about paying the taxes.
A charitable gift can offset some of the tax burden for people who will have to itemize their taxes in 2021. There is a great way to prefund your charitable giving in the year you need the tax break the most! A Donor Advised Fund (DAF) is like your own personal charitable savings account. The year you make the contributions to the DAF, you get the tax deduction. Then, you can invest the money and grant the funds to charities in the future.
If you have assets that have not sold yet, you can gift all or part of the asset to charity or use other charitable planning tools to help you offset the tax burden. Some gift planning tools even provide income!
#5 - CARES Act Opportunity for All!
If you are planning to take the standard deduction on your taxes, the CARES Act made it possible to get a charitable deduction in 2021. Each taxpayer can get a federal tax deduction of $300 ($600 married) regardless if you take the high standard deduction or itemize their taxes. This is considered an “above the line” deduction for tax nerds and is designed to enhance funding to nonprofits because of the impact of COVID. Don’t let it go to waste!
Reallocating your tax dollars to local nonprofit organizations is a great way for you to save taxes in 2021! Reach out to your advisors or other experts to help you come up with the best tax advantaged strategies for your situation.