It's the most wonderful time of year and before you know it, the holidays will be here. If you are anything like me, you like to give all year round but especially during the holiday season. In order to maximize your gifting abilities (and minimize stress in the process), it’s important to keep in mind a few details that you may or may not be aware of.
If you’re not sure how your finances match up with your upcoming year-end giving strategy, now is the time to prepare yourself by making your lists and checking them twice. Organization is a key factor. Follow the five tips below to maximize your charitable giving strategy in 2023.
1. Do Your Research
By using sites such as Guidestar or the Better Business Bureau’s Wise Giving Alliance, you can learn more about the groups you’re interested in offering donations.
The organization you’re involved with should also be able to provide registration information including 501(c)(3) - this means an organization is characterized by the IRS as a "Non-Profit". You may also use the tax-exempt organization search tool available on the IRS website to obtain specific information as well.
2. Bundle Your Donations
As the standard deduction has increased since the Tax Cuts and Jobs Act of 2017, you may choose to save money over time and donate every few years as opposed to each year, consecutively. By doing this, you may be able to save a lump sum donation large enough to push you over the standard deduction threshold ($13,850 for single filers and $27,700 for Married filing jointly in 2023). This will allow you to itemize your deductions one year and take advantage of those donations while taking the standard deduction the following year.
As life happens and things change, so can your giving.
If you’re interested in accomplishing this, you might consider a donor-advised fund (DAF), which allows you to make a charitable donation and immediately realize the tax break in year one. You’ll then be able to determine when, where, and how much you donate to your preferred charities over time. A DAF gives individuals and couples ultimate flexibility in their giving strategy. As life happens and things change, so can your giving.
3. Donate Appreciated Stock
By donating stocks or other appreciated assets, such as artwork or antiques, you might reduce capital gains tax on investments.1
In particular, high-income earners might consider a non-cash donation specifically because of the tax advantages they may be awarded. Even those who have what they might consider small holdings could benefit by making a donation of appreciated investments this holiday season.
4. Utilize Your IRA
If you’re a retiree over the age of 70, you might consider transferring money from your IRA to a qualifying charity known as a Qualified Charitable Distribution or a QCD. These distributions can oftentimes be the most tax-efficient way of meeting any required minimum distribution. They work by lowing taxable income before any deductions. There’s no need to itemize your deductions in order to benefit.
According to the National Association of Enrolled Agents, you may distribute up to $100,000 per year per taxpayer.
According to the National Association of Enrolled Agents, you may distribute up to $100,000 per year per taxpayer. This increases to an acceptable $200,000 for married couples if they both have IRAs.2 Although this strategy has existed for some time, it only recently became a part of the permanent tax code.
5. Monitor and Evaluate Your Portfolio
It’s important to set personal reminders, at least annually, to re-evaluate your financial and personal priorities and update them if need be. Your interests and priorities are bound to change over time and so will the causes you choose to support. Being aware of these fluctuations is key and maintaining a thoughtful attitude is what makes the holidays meaningful.
At the end of the day, you can donate at any time of year - it just feels better around the holidays. Giving helps to get people into a joyful mood while having a disproportionately large positive impact on the lives of others. Use these tips to maximize your plan.
HAPPY GIVING!
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 | About the Author James M. Comblo, CFF is the President & CEO of FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients live the life they want, not the life they are forced to. To learn more about him click here. |