Ways you can make charitable giving fit into your financial plan

charitable giving strategies

December 3, 2019 is an international day of charitable giving known as GivingTuesday. It is predicted to surpass half a billion dollars raised in the U.S. alone. The benefit of financial gifting is two-fold:

  1. Fulfilling philanthropic desires
  2. Taking advantage of IRS tax deductions 

Before making charitable donations, consider how charitable gifting aligns with your overall financial plan. There are two popular tax-advantageous gifting strategies to consider:

Gifting RMDs: One of the advantages to Individual Retirement Accounts (IRAs) and other qualified retirement accounts such as a 401(k) is the ability to defer taxes. The IRS has regulations stipulating how long you may defer taxes, mandating Required Minimum Distributions (RMDs) in the year an individual attains the age of 70 ½. By gifting all, or a portion, of an RMD, investors can exclude the gifted value from their earned income on their tax return. 

Gifting appreciated investments: If your brokerage or investment account has high unrealized gains, gifting highly appreciated investments to a charitable organization avoids realizing gains and the subsequent capital gains tax. This gifting approach can be extremely useful in years where the stock market has strong performance and high gains. 

GivingTuesday focuses on financial gifting, but an often-overlooked gifting strategy is volunteering time. While there are tax advantages to financial gifting, many charitable organizations struggle to fulfill volunteer staffing requirements. Charitable gifting can be a rewarding endeavor and year-end presents a great time to review your financial and philanthropic goals. Be sure to keep your other financial priorities in mind without sacrificing long-term fiscal security. 

Please note, it’s critical to vet the legitimacy of charitable organizations. There can be a spike in potential fraudulent institutions around GivingTuesday. Doing your due diligence before gifting is critical to make sure your thoughtful donation is getting in the right hands.

Before making tax decisions, it is recommended that you consult a tax professional.

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