As we approach the end of the year, it’s likely you’re considering a gift to a charity that you’re passionate about, or are actively being asked to give in support of an important cause. As you evaluate your giving strategies for 2023, it’s important to evaluate HOW you’re giving, as there are a few tips and tricks you can use to more strategically support the causes you care about in a tax-beneficial manner.

1. Donor–Advised Funds (DAFs):

One of the most popular giving vehicles in the country, donor–advised funds operate similar to a charitable savings account and allow you to use a technique called “charitable bunching,” where you front-load charitable donations into the current year, knowing that you plan to make these donations in future years. By gifting a larger amount of money to establish your donor-advised fund up front, you receive a tax deduction for the full amount gifted—this allows you to attribute the full contribution for the current tax year. From there, you can advise which nonprofits will receive grants from your donor-advised fund in the coming months and years, allowing you to still support important causes while taking advantage of a larger tax deduction in the year the fund was established. Over time, you can continue taking advantage of charitable bunching by making tax-deductible contributions to your donor-advised fund at your discretion.

2. Gifting Equities:

For some, it may not be in your best interest to simply hit the “Donate Now” button and enter your credit card information. Many charities accept gifts of appreciated stock, which allow you to directly transfer equities to the 501(c)3 nonprofit. This allows you to completely avoid capital gains taxes on the sale of your stock, which receiving the full tax deduction for the fair market value of your shares when they’re donated. You can even use appreciated stock to establish a Donor-Advised Fund!

3. Qualified Charitable Distributions (QCDs):

If you are over the age of 70 ½, you can direct up to $100,000 from your IRA to a majority of charities. If you’re of the age where you are subject to the rules for Required Minimum Distributions (RMDs) from your IRA, QCDs fully count toward those RMDs. That means you avoid income tax on the funds you would have received, while allowing you to give meaningfully in support of the causes you are passionate about. While QCDs are a great tool to support nonprofits, they are currently ineligible to be used in establishing or contributing to a donor-advised fund.

Our family has been especially invested in charitable giving over the last few months, as my oldest daughter recently shared that she is fundraising for the Leukemia & Lymphoma Society through her school. I’m so incredibly proud that she’s taking full advantage of this opportunity to help others, and am hoping she continues to pursue avenues to serve in the years to come.

If you have any questions about these charitable giving tools or are interested in learning more, feel free to consult your financial advisor or call/text us at (202) 800-0800!