Win-Win Charitable Giving

Win-Win Charitable Giving

The holidays are a special time to focus on giving not only to family and friends but to charities as well. Many of you will be giving to a charity this holiday season because you are supporting a cause which is meaningful to you, and you may not care if you get any financial benefit from giving.  But what if you could do good for the charity and your taxes at the same time?

Charitable donations can lock in tax deductions that will save you money.  Having a simple plan and willingness to use alternatives to cash donations can help you lower your tax liability.  Check out these charitable giving tax strategies to create your win-win charitable plan that you can implement throughout the year!

Bunch donations

The Tax Cuts and Jobs Act resulted in a higher standard deduction, so many taxpayers are no longer able to itemize and get a write off for charitable donations.  By bunching or grouping multiple annual donations in one year, you can itemize for a higher deduction in that year and take the standard deduction in other years.  You may want to time this strategy with a higher income year.

Donate appreciated assets instead of cash

If you have an asset that has appreciated over time, selling the asset could result in a capital gain which increases your tax liability.  By donating the asset directly to charity, you can avoid paying capital gains taxes and you may be able to get a tax deduction for the fair market value of the asset if you itemize.  The charity does not have to pay the capital gains taxes either!

Donate directly from your IRA

For those at least 70 ½ years old, you can transfer up to $100,000 directly from your IRA account to a charity and avoid paying taxes on the distribution.  If your retirement assets are in a 401(k) or other similar retirement plan, you will need to transfer the money to a Rollover IRA before you can use this strategy.

Open a donor-advised fund

A donor-advised fund (DAF) is like a charitable investment account for the sole purpose of supporting the charities you care about.  You can contribute cash and/or appreciated assets then direct payments to the charities of your choice whenever you want.

  • The DAF is a great tool to use when bunching donations because you can keep the money in the DAF and direct it to the charity over multiple years.
  • Not all charities will accept appreciated assets, but the good news is a DAF will. So use the DAF to facilitate your strategy to donate appreciated assets.

I love sharing my time, talents and treasure with Mainsprings, Haiti Healthcare Partners, Savvy Ladies, and a few other charities.  Please reach out and let me know what charities and causes you like to support!  We here at MainStreet Financial Planning would be happy to help you create your win-win charitable plan.

Vida Jatulis
Vida Jatulis

Vida joined our MainStreet Financial Planning team in 2022. She utilizes her life and work experiences to help clients develop an action plan for a vibrant and healthy financial life. Vida is a CERTIFIED FINANCIAL PLANNER™ professional with a Master of Science degree in Investments and over 15 years of experience as a Financial Planner, Wealth Advisor, Pension Consultant, Trust Officer, and Portfolio Manager. In addition, Vida has personal experience with struggling and succeeding to reach milestones such as purchasing a home, putting kids through private school, saving for college, achieving debt free status, saving for retirement, raising a family on a single income and much more.

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