Tax Considerations

There are many non-financial reasons to support local nonprofits through contributions to River Counties Community Foundation.  But also worth noting are tax considerations and strategies that can make contributing to RCCF even more attractive.  The Community Foundation is a 501(c)(3) tax-exempt entity, and your contributions are tax-deductible in the year the donation is made.  Depending on your circumstances, there may be additional opportunities to structure your contributions in ways to enhance tax-efficiency.

Donations of Appreciated Securities

Donations to RCCF can certainly be made by check or wire transfer, but we are also equipped to receive your contribution in the form of financial securities such as shares of stock.  You may own shares that have grown significantly in value since you first acquired them.  These capital gains are taxable at the time you sell the shares.  But if the shares are simply transferred directly from your brokerage account to RCCF, long-term capital gains are not taxed and you will receive a tax deduction equal to the full market value of the shares at the time of transfer.

This approach can be a tax-efficient “win/win” for you and for RCCF and is easily handled by your broker and RCCF.   

Donor Advised Funds

In 2018, the amount of the standard deduction for federal tax returns was almost doubled.  An unintended consequence of this tax law change was that many people no longer itemize deductions and may receive reduced tax benefits from their charitable contributions for the year.

By establishing a Donor Advised Fund at RCCF, you can contribute enough money in one year for RCCF to fund multiple years’ worth of annual gifts to the local nonprofits that you recommend.  Your tax deduction occurs in the year of your contribution, equal to the full amount of your “upfront” funding.  This may put you in a position where itemizing your deductions rather than taking the standard deduction will reduce your tax bill.

Qualified Charitable Distributions

If you have an Individual Retirement Account (IRA) and are at least 72 (or 70 ½ if you reached that age before January 1, 2020), your IRA must make Required Minimum Distributions (RMDs) or incur a 50% penalty on the RMD amount.  Qualified Charitable Distributions (QCDs) count toward your RMD for the year if paid directly to a qualified charity such as RCCF.  These distributions reduce your federally taxable income even if you don’t itemize your deductions.  Some limitations apply:  you can make up to $100,000 of QCDs per spouse a year, and you cannot send them to your own Donor Advised Fund.

Please note, River Counties Community Foundation does not give tax advice.  You should review these concepts with your tax or financial advisors.