Ah, #GivingTuesday. The day where your inbox fills up with heartfelt appeals and your heartstrings get tugged tighter than the lid on a jar of cranberry sauce. But let’s face it—when it comes to charitable giving, generosity feels even better when it’s paired with smart tax planning.
Giving is something that most people can relate to. You can give to charitable organizations via your time by volunteering or providing money or assets which help drive the operations of your cause. Giving can also be strategic to maximize tax breaks that are written into the IRS code. Some charitable donations when executed properly can significantly lower your tax burden.
Here’s where donor-advised funds (DAFs) and leveraged charitable donations enter the chat. Not only can these strategies supercharge your giving, but they can also result in a hefty tax break. Let’s dive into how you can make both your heart and wallet happy.
What Are Donor-Advised Funds?
Think of a DAF as your personal piggy bank with extra perks. It’s like opening a charitable savings account:
You contribute money, stocks, or other assets into the fund.
Get an immediate tax deduction for your contribution (cha-ching!).
Recommend grants to your favorite charities over time.
Why use a DAF?
Tax Timing Flexibility: You get the tax deduction today, even if you distribute the funds next year.
Maximize Asset Value: Donate appreciated assets (like stocks) to avoid capital gains tax and get a deduction on the full market value.
Leverage Charitable Donations Like a Pro
For those looking to make their giving go the extra mile, here are some other strategies:
1. Bunch Your Contributions
Instead of giving small amounts annually, consolidate several years' worth of donations into one year. This might push you above the standard deduction, letting you itemize for maximum tax savings.
2. Donate Appreciated Assets
Stock market treating you well? Donate appreciated securities instead of cash. You’ll avoid capital gains taxes and deduct the full fair market value. There are also private placement investments available to accredited investors that help increase the value of your contributions.
3. Qualified Charitable Distributions (QCDs)
If you’re 70½ or older and have an IRA, consider a QCD. It lets you satisfy your required minimum distribution (RMD) while excluding the donation from taxable income.
Why Giving Strategically Matters
It’s easy to write a check or use Venmo for a few bucks, but strategic giving through tools like DAFs or Leverage Charitable Donations doesn’t just benefit your favorite cause—it can significantly impact your tax situation. And as any savvy giver knows, the less you pay in taxes, the more you can give next year.
Let’s Plan Your Giving Strategy
This #GivingTuesday, don’t just give—give smarter. If you want to explore how donor-advised funds or other strategies could work for you, schedule a consultation. Together, we can make a plan that maximizes your impact and minimizes Uncle Sam’s cut.
Because giving is great. But giving wisely? That’s where the magic happens.
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