Tax Strategies that may Increase the Impact of your Pledge to Unitarian Society

Updated December 2021

Here are four ways you may save taxes and/or increase the impact of your pledge. You could increase your pledge and offset your extra gift with tax savings or maintain your pledge and enjoy the tax benefits yourself. If you have the means to do so, you may wish to explore one of these options with your tax preparer or your investment advisor.

Charitable Contribution If you itemize your taxes, your entire pledge counts as a charitable deduction, to be noted on Schedule A. You can deduct up to 60% of your adjusted gross income for cash contributions. Contributions in excess of this limit can be carried forward for up to 5 years. If you take a standard deduction and don’t itemize, you may reduce your taxable income instead, by paying your pledge with a Qualified Charitable Distribution from an IRA.

Qualified Charitable Distribution (QCD)

If you plan to draw funds from an IRA retirement account, and are old enough, there are significant tax benefits if you make your USNF donation through a Qualified Charitable Distribution (QCD). Those eligible can use their Individual Retirement Account (IRA) to pay their pledge to the Unitarian Society and avoid federal and state income tax on the distribution. There’s a December 31 deadline for this year’s tax savings.

If you’re at least 70 1/2 and you pay your pledge with a Qualified Charitable Distribution, your entire donation can be excluded from your federal AND state taxable income. This works whether or not you itemize deductions. If you are 72 or older, the IRS requires you to take a required minimum distribution (RMD) from your tax-deferred retirement accounts. Those required to take more RMD than they may need for living expenses benefit most from this strategy. A gift by QCD may eliminate or reduce the tax of RMD income.

Donor-Advised Fund You can set up a giving account at a charitable foundation or with an investment firm. A Donor Advised Fund allows donors to make a charitable contribution, receive an immediate tax deduction and then make grants from the fund over time.  Donors can contribute to the fund as frequently as they like, perhaps timed for to maximize tax savings, and then recommend grants to their favorite charitable organizations whenever it makes sense.

Giving appreciated stock If you donate stock that has increased in value since you bought it more than a year ago – and if you itemize deductions -- you can take a charitable deduction for the stock’s fair market value on the day you give it away. You’ll avoid capital-gains taxes on the increase in value over time, which you would have had to pay if you sold the stock then donated the cash proceeds. You can deduct up to 30% of your adjusted gross income for long-term appreciated assets. Contributions in excess of this limit can be carried forward for up to 5 years.

Seek professional tax advice This article is for your information only. USNF is not a legal, tax or estate advisor. Before making a decision, you should consult your tax advisor or financial planner for information that is specific to your situation.

How these strategies work

Qualified Charitable Distributions

  • You must be at least 70 ½.
  • You must request the financial institution that holds your tax-deferred account to write a QCD check to the Unitarian Society of Northampton and Florence. They will send the check to you or to USNF.
  • You don’t need to itemize deductions to get the tax benefit; you can get the savings with the standard deduction. You cannot take a charitable deduction for this type of contribution. The tax benefit you receive is excluding this contribution from your gross income, therefore reducing federal and state taxes.
  • Unlike normal charitable donations, you also get the tax savings on the Massachusetts return (5%).
  • A QCD can only be taken from an IRA. You can’t take a QCD from a 401(k), but you can transfer funds to an IRA first, then make a QCD. Check with your tax advisor.
  • The amount of tax savings depends upon your taxable income and federal tax bracket.

If you’re 72, the IRS requires you to take a required minimum distribution (RMD) from your tax-deferred retirement accounts. A QCD may eliminate or reduce the tax impact of RMD income. A QCD will potentially satisfy your RMD for the year and, under most conditions, can be excluded from your taxable income. This strategy is particularly impactful if you must withdraw more money from your IRA than you need for living expenses.

If you’ve already paid some of your current (FY22-23) pledge, you could still use a QCD to pay your balance (or increase by your anticipated tax savings) before December 31. Talk with our Treasurer, Dave Nelson. Next year you may wish to pledge to take full advantage of QCDs.

 QCD Next Steps:

  • Contact the administrator of your IRA to request that a check be issued to the Unitarian Society of Northampton and Florence as a Qualified Charitable Distribution. You may have the option to have the check sent to you or directly to the Unitarian Society.
  • Contact our office 413 584-1390 or Dave Nelson, This email address is being protected from spambots. You need JavaScript enabled to view it., to let us know that you’re planning on making a qualified charitable contribution so we can provide the proper acknowledgement of your gift.

Donor-Advised Fund

Contact Dave Nelson, This email address is being protected from spambots. You need JavaScript enabled to view it., to learn how this can work. Or contact a charitable foundation such as the Community Foundation of Western Massachusetts to learn the process. You can also set up a fund with an investment firm. This will include choosing the type of charitable fund you’ll use, determining how your funds will be invested, making an initial deposit to your charitable fund, and then, instructing the foundation how to distribute your gifts. There are modest fees for this service.

Donation of stock

Contact Dave Nelson for advice on how to transfer stock to the Unitarian Society.

Planned giving to our Legacy Fund…As you plan your charitable giving, consider a gift to our Legacy Fund, a planned future gift to the USNF that you set up during your lifetime and that is gifted to the Society upon your death. There are several ways to make a Legacy Gift:

  • Make a direct provision in your will, either a dollar amount or percentage of your estate, or the distribution of property to USNF.
  • Designate the USNF as a beneficiary or co-beneficiary on your:
    • Bank account (checking, savings, money market or CD),
    • Brokerage account,
    • IRAs or other retirement account, or
    • life insurance.
  • Set up an income annuity through the UUA with the USNF as the recipient of the remaining balance upon one’s death (or the death of two beneficiaries).

You are also welcome to make a direct gift to the Society during your lifetime. Some gifts, such as appreciated assets (e.g. Stocks/bonds/mutual funds) or minimum required IRA distributions may give you tax benefits.

Please contact Cathy Lilly 413-568-8027 or Linda Adams 413-323-9596 to notify us if you have already established a legacy gift or for assistance in sorting through your options