Maximizing Your Charitable Impact: A Smarter Approach to Giving
As the spirit of giving takes center stage, it’s essential to consider the most effective ways to make a positive impact. With millions of Americans participating in Giving Tuesday, it’s clear that charitable donations are a vital part of our society. However, did you know that gifting assets other than cash can lead to a bigger tax break?
The Power of Appreciated Assets
Profitable stocks, in particular, are an attractive option for charitable giving, according to certified financial planner Michael Lofley. By donating these assets directly to charity, you avoid paying taxes on the sale, and the charity doesn’t owe taxes when they sell it either. This win-win situation benefits everyone except the IRS.
Tax Implications: Understanding Your Options
When filing taxes, you can choose between the standard deduction and itemized deductions. While the standard deduction has increased since 2018, only about 10% of taxpayers itemize their deductions. For 2024, the standard deduction is $14,600 for single taxpayers and $29,200 for married couples filing jointly. To claim the charitable deduction, your total itemized deductions must exceed these thresholds.
Bunching Donations for Maximum Impact
Experts recommend bunching donations of profitable investments to exceed the yearly standard deduction. One strategy is to open a donor-advised fund, which allows for an upfront deduction and flexibility to make future gifts to eligible nonprofits. By “stacking deductions in alternating years,” you can maximize your tax benefits and support your favorite charities.
Don’t Miss Out on Potential Savings
While giving cash is certainly generous, it may not be the most tax-effective method. By donating appreciated assets, you can avoid capital gains taxes on growth and deduct the market value of the investment. With the right approach, you can make a more significant impact while also reducing your tax liability.
Take Control of Your Charitable Giving
This year, consider exploring alternative assets to donate to your favorite charities. By doing so, you can create a bigger impact and enjoy greater tax benefits. Consult with a financial advisor to determine the best approach for your unique situation and make the most of your charitable giving.
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