Why Charitable Giving Deserves a Spot in Your Year-End Review
As the holiday season ramps up and the year winds down, many people focus on tax documents, budgets for the year ahead, and financial checklists. These are all important considerations, but charitable giving can be just as meaningful. There is a dual benefit to charitable giving around the holidays. You can support causes you care about and you are strengthening your overall financial plan. Partnering with your financial advisor can help you understand why now is an ideal time to formalize a giving strategy. Let’s talk about what this might look like…
Clarifying Your Values and Philanthropic Goals
The first step to outlining a charitable giving strategy is to figure out what is most important to you – which causes or communities matter most to you? This is a good time to sit down with your advisor and reflect on your personal experiences, any major life changes, or new priorities that have emerged over the past year. After reflecting on these developments, you can work together to connect your giving goals with your broader financial goals. Your financial advisor is there to help you articulate or refine a philanthropic mission.
Review Your Current Year’s Giving Activity
The next step is to review your current year’s philanthropy. This is a good time to take inventory of any cash donations and non-cash gifts you have made, as well as the value of any volunteer hours you provided. You can review any recurring commitments or donor relationships you have established and look at what has worked well and what you might like to change in the year to come.
Evaluate Your Giving Budget for Next Year
After clarifying your values and reviewing the current year’s giving activity, you can evaluate your giving budget for the upcoming year. This is a good opportunity to sit down with your financial advisor to determine how much to give, based on your income, expected expenses, and your unique philanthropic priorities. You can explore different automated giving options and how different giving strategies provide considerable tax benefits.
Understand the Tax Benefits and Smart Giving Strategies
When you give to a qualified charity, your donation may be tax-deductible. There are several charitable giving strategies to consider that can maximize both your generosity and your tax benefit.
Qualified Charitable Distributions (QCDs)
If you are at the correct IRA distribution age, you may donate directly from your IRA to a charity though a QCD. The amount that you give counts toward your required minimum distribution (RMD) but does count as taxable income. QCDs are a great way to give to organizations you care about while keeping your taxable income lower.
Donating Appreciated Securities
Donating stocks or mutual funds that have increased in value directly to a charity avoids paying capital gains taxes. This type of charitable-giving strategy allows the charity receiving the gift to benefit from its full value and allows you to keep more of your portfolio working toward your long-term goals.
Donor-Advised Funds
A donor advised fund allows you to make larger initial donations (creating one big deduction) then distribute the money to charities at your own pace. This strategy is especially useful if you are close to the standard deduction threshold.
Using RMDs for Charitable Giving
For retirees already taking RMDs, pairing those distributions with charitable giving strategies can help reduce taxable income while meeting required distributions in a way that aligns with your values.
A Meaningful Part of Financial Wellness
Philanthropy is much more than a financial tactic. It is a way to express your values while providing important charitable assistance. If you would like help in reviewing or establishing a charitable giving strategy that is unique to you, contact one of our financial advisors today. We are here to help make charitable giving an integral part of your broader financial strategy.