Charitable Gifting Strategies
As we approach year end you may already notice that charities are ramping up their asks for donations. Many people are thinking ahead to tax season and want to maximize their tax advantages while also doing good in their community. and/or in the world at large. Charitable giving at the end of the year also allows nonprofits to plan their budget for the new year.
Knowing when and how to give your money to the causes you support might help you to maximize your impact and save on your taxes at the same time. Assuming you give generously for your tax bracket. Please consult with your financial advisor and tax specialist when making larger donations.
What to Give?
While cash is easy to donate, other strategies can increase your impact and minimize your tax burden.
Appreciated Securities: Donating stocks directly to a charity generally avoids capital gains tax and allows you to deduct the full value.
Complex Assets: Giving ownership to a charity in a privately held business or real estate can be powerful, though timing near a sale is critical to avoid tax issues.
IRA Qualified Charitable Distributions (QCDs): If you're subject to Required Minimum Distributions (RMDs), you can direct funds from your IRA to a charity. This satisfies your RMD and the amount is excluded from your taxable income.
These options above help you give more efficiently than cash alone.
How to Give?
Depending on the level of your annual giving, different vehicles exist beyond direct cash or checks to manage your philanthropy effectively.
Direct Contributions: The simplest method, which can involve institutional checks or wiring appreciated securities. Complex assets (like real estate) require advance planning with financial and legal advisers.
Private Foundation or Donor-Advised Fund (DAF): Great for creating a philanthropic legacy and involving family. Work with advisers to choose the right vehicle based on your specific goals.
Split Interest Trust: Options like charitable remainders or lead trusts can benefit a charity while also providing an income stream or shifting assets to family members. Be aware that these are irrevocable trusts with specific term structures. Always consult financial, tax, and legal experts before commiting to a complex planning structure like this.
Where to Give?
Who you donate to is your personal choice, but robust research is vital to avoid scams and ensure your money is used effectively. Ensure the charity is properly registered with its state and publishes its tax returns (ask the charity for a 990 link).
Here are some resources to use when evaluating organizations:
Charity Navigator: Provides ratings and information on a charity's financial health, accountability, and transparency.
CharityWatch: A more aggressive ratings organization that evaluates how efficiently a charity uses its donations.
Better Business Bureau (BBB) Give.Org: Assesses charities based on 20 standards for accountability and transparency.
Ultimately, the best way to know if an organization is worthy is to get involved yourself—volunteer for the organization, or serve on their Board of Directors. Thoughtful giving always takes a little extra effort.
If you have questions about this, give us a call. We are happy to discuss what your goals and options might be.
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