We love giving back and especially love Giving Tuesday (so much that Melissa even made a video about it)! Giving Tuesday is December 1st this year. What better time to share 10 practical financial planning considerations for your charitable endeavors? This list has been updated and revised over the years.
New(ish) tax law means it’s time to revisit your plan.
When the Tax Cuts and Jobs Act went into effect in 2018 it caused roughly 30 million Americans to switch from itemizing to taking the standard deduction (Source: CNBC). If you are one of those 30 million, read below for ideas on how to maximize tax reduction when you’re not able to itemize.
Qualified Charitable Distribution for the win.
The CARES Act suspended Required Minimum Distributions (RMDs) for 2020 but are still allowing Qualified Charitable Distributions (QCDs) for the year. If you are over age 70.5 and have IRA assets you can transfer up to $100,000 of your distribution directly to charitable organizations. This distribution is tax-free, and the amount is not included in your adjusted gross income (AGI). Make sure to keep track of your records, make your gift in accordance with QCD rules, and report your qualified gift to your tax professional.
Get on a first name basis with organizations that matter to you.
Charities appreciate your gifts and dollars. They also enjoy hearing from you about what the organization means to you and the impact that you hope your gifts will have. Getting involved and building relationships is valuable for the organization and can also be rewarding to you.
Spread the word or give in groups.
Giving Tuesday is a social phenomenon for good. Sharing your own charitable endeavors can create communication and encourage generous behavior within your network. There are so many amazing charities and the world needs to hear about them, so hashtag away! #GivingTuesday
Take advantage of your corporate match.
If you work for a company who provides a match to donations, your time for making it count this calendar year is fleeting. Decide how you would like your match to be utilized and make sure to dot your i’s and cross your t’s with the appropriate paperwork or process to get the money into the right hands.
Gift appreciated stock for a double-tax plus.
What’s better than a charitable gift that multiplies its power with a current tax deduction and reduced future tax liability? If you gift appreciated assets like stocks in taxable accounts that have grown over time, you’re doing just that! You would potentially get a charitable deduction and take away future tax liability on realized capital gains. Not sure how to make this happen? We would be happy to coordinate with you and the organization you want to help to take care of the details at your instruction.
Do holiday shopping and support those you love.
Now, more than ever our small businesses need our support. When possible, shop small. Buy products, purchase gift cards, share their social media posts or write a review. These businesses are integral to our communities. If you are using Amazon, services like Amazon Smiles allow you to shop and provides a percent of sales to your preferred organization.
Establish or add to a Donor Advised Fund.
A donor advised fund allows you to combine the opportunity for gifts of appreciated stock (see #6 above) as well as taking an immediate deduction and spreading out your gift over time if you prefer. Also, in peak earning years with presumed lower earnings in the future (read, near retirement), you can preload future gifting in a year that may be very impactful for your finances.
Make your donations generational.
Shared philanthropy projects can help to introduce younger children to important money topics or provide governance practice for adult children. You can see how family dynamics work and teach about money with less self-interest. Plus, donating time, effort, and money just plain feels good. Call it family bonding.
Take advantage of the CARES Act.
Typically, charitable contributions can only be deduced if you are itemizing. Through the CARES Act, this has changed for 2020. Taxpayers who don’t itemize deductions can take a charitable deduction up to $300 for cash contributions made in 2020 to qualifying organizations. More information on the changes to charitable contributions for 2020 can be found directly on the IRS website.
#GivingTuesday is a great opportunity to review and upgrade your game plan. As you can see there are several ways to make the most of your charitable giving! If you’re looking for optimal financial results, check out our Charitable Giving Strategy Guide and coordinate with your trusted advisors. It takes a bit of planning to get the maximum impact for you and the organizations that matter to you and your family.
Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.