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Midyear Outlook 2021
July 19, 2021
Year-End Tax Planning Tips for Busy Professionals
Year-End Tax Planning Tips for Busy Professionals
December 13, 2021

My Three Favorite Ways to Donate to Charity

Published by Anh Tran, CFP®, Esq.  on November 23, 2021
Charitable Giving

Planning your charitable giving with intention can benefit both the nonprofits and your bottom line.

As the end of the year approaches, giving — in a variety of forms — becomes top of mind for many of us. For financial planners, charitable giving in particular is often part of year-end planning with our clients. These conversations include whether to donate cash, stock or another asset; which strategy to use; and how much to give. Creating a plan for donating based on your unique financial situation can result in more money to gift to charity while maximizing your income tax savings.

Charitable giving has become a priority for many Americans. Donations reached a record $471.44 billion in 2020, a 5.1 percent increase from 2019, according to “Giving USA 2021: The Annual Report on Philanthropy for the Year 2020.” Giving by individuals was up 2.2 percent to $324.1 billion and accounted for 69 percent of all giving.

If charitable giving is an important part of your financial planning, consider the following three approaches:

1. Donate appreciated stock.

Do you have appreciated stock that you have held for more than one year? If so, this approach allows you to eliminate capital gains taxes when making a donation. You also will receive an income tax deduction for the full fair market value of the stock at the time of the gift. By eliminating capital gains taxes, you will be able to donate more to the charity of your choice than by selling the stock and donating the cash. In addition, you will have a larger amount to deduct from your taxes.

2. Donate to a donor advised fund.

Many of my clients like donor-advised funds because they’re similar to a family foundation, but easier to manage. A DAF is a fund or account maintained and operated by a public charity, referred to as a “sponsoring organization.” Donating to one allows you to receive a large tax deduction upfront on years that you need it (for example, a bonus or the sale of your business). However, you don’t have to decide which nonprofits will receive the funds until you’re ready.

Here’s how it works. You can make a tax-deductible charitable contribution of cash, stocks or other assets, such as private company stock to a DAF. You’ll be eligible for a tax deduction in the year you contribute. You then can direct how the money is invested and let your donation potentially grow tax-free. When you’re ready, choose one or more IRS-qualified public charities to receive a grant from the fund. Giving in this way is ideal for donors who want to involve their family in giving and leave a charitable legacy.

3. Donate your IRA to charity.

Also known as a qualified charitable distribution, this is a good option if you are 72 or older and don’t need the required minimum distribution from your IRA. You can avoid paying taxes on your RMD of up to $100,000 by making a distribution directly to a qualified public charity. Keep in mind that no income tax deduction is allowed for the contribution. That’s because the amount of RMD donated is not included in your adjusted gross income.

Opting for a QCD also could make sense if the following is true: you can’t itemize deductions; the majority of your assets are held in an IRA; or the RMD would push you into a higher tax bracket. Otherwise, donating appreciated securities might be a better option for you.

Creating a Multi-Year Charitable Giving Plan

With these strategies in mind, creating a multi-year giving plan also can result in a greater tax deduction. Your plan could include “bunching” charitable donations in alternate years or accelerating giving in high-income years. At SageMint Wealth, we can help you craft a strategy that makes sense for you. As you plan your charitable giving, remember that it’s possible to grow your wealth while investing in a better world.

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Anh Tran and Janice Hobbs are registered representatives with, and securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.

Anh Tran | Domiciled State: California | 2600 Michelson Drive, Suite 950, Irvine, CA 92612 | CA Insurance Lic. #0F70554.

Janice Hobbs | Domiciled State: California | 2600 Michelson Drive, Suite 950, Irvine, CA 92612 | CA Insurance Lic. #0661646

The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

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