We know that giving back is deeply meaningful to many of our clients. Whether you're passionate about education, healthcare, the Church, the environment, or your local community, charitable giving can be a powerful way to create positive change. And when done strategically, it can also provide valuable financial benefits.
Here are some smart charitable giving strategies to consider, whether you're planning for year-end or thinking long-term.
1. Bunching Donations for Bigger Tax Deductions
With the standard deduction now higher, fewer people itemize their taxes each year. One strategy to counter this is donation bunching—making two or more years’ worth of charitable contributions in a single year. This can allow you to itemize in the year of the donation and take the standard deduction the next.
Example:
Instead of giving $5,000 per year, you could donate $10,000 in one year and none the next. This might let you surpass the standard deduction threshold and unlock greater tax savings.
2. Donor-Advised Funds (DAFs): Give Now, Decide Later
A donor-advised fund allows you to make a charitable contribution, receive an immediate tax deduction, and then recommend grants to your favorite charities over time. It’s a flexible, efficient tool for ongoing giving, and it’s especially useful in high-income years when you want a larger deduction now but plan to distribute the funds gradually.
3. Qualified Charitable Distributions (QCDs): Ideal for IRA Owners Over 70½
If you’re age 70½ or older, you can give up to $100,000 per year directly from your IRA to a qualified charity—this is known as a Qualified Charitable Distribution. A QCD can count toward your Required Minimum Distribution (RMD) but isn’t included in your taxable income, which can help lower your overall tax burden and even reduce Medicare premiums.
4. Appreciated Securities: Give More, Pay Less Tax
Instead of writing a check, consider donating appreciated stocks, mutual funds, or other securities you’ve held for over a year. You’ll avoid paying capital gains tax and can deduct the full fair market value of the asset. It’s a win-win for you and the organization you support.
5. Charitable Trusts: Give Strategically, Leave a Legacy
For larger gifts or more complex planning, charitable remainder trusts (CRTs) or charitable lead trusts (CLTs) can offer both income and tax benefits. These strategies require careful planning, but they can be a great fit for individuals who want to leave a lasting legacy while maintaining some control or income from the assets during their lifetime.
Align Giving with Your Broader Financial Plan
Every charitable gift—big or small—should fit within your larger financial picture. We can help you determine which strategy makes the most sense based on your income, assets, values, and goals.
If you’re thinking about how to give more effectively or want to include charitable giving in your financial plan, we’re here to help. Let’s work together to align your generosity with a strategy that maximizes both impact and tax efficiency.