As the year is quickly wrapping up, many people are looking for ways to make a difference while also maximizing their tax benefits. Year-end charitable giving is a powerful opportunity to both support causes you care about and potentially reduce your taxable income.
Why End-of-Year Giving Matters
The final weeks of the year are crucial for many charitable organizations. Donations made during this period often account for a significant portion of their annual funding, enabling them to meet their goals, launch new programs, or simply keep their operations running. For donors, giving before December 31 can have the added benefit of reducing tax liabilities for the year. We always recommend contacting your tax professional before implementing any of the strategies listed below.
Key Strategies for Effective Charitable Giving
- Choose Organizations Carefully: You will want to do your research when choosing where to donate. You should consider supporting charities that align with your values and have a proven track record of effectiveness. The following websites are helpful tools to help you evaluate a charitable organization:
- Better Business Bureau’s Wise Giving Alliance: Find Best Charities To Donate | Charity Ratings, Reviews
- Charity Navigator: Charity Ratings and Donor Resources | Charity Navigator
- GuideStar: Nonprofit data for donors, grantmakers, and businesses | GuideStar | Candid
- Make a Recurring Commitment While one-time gifts are impactful, consider setting up recurring donations. Monthly contributions provide charities with reliable funding and allow you to support causes consistently throughout the year.
- Take Advantage of Tax Deductions: Donations to qualified 501(c)(3) organizations can be tax-deductible. Be sure to:
- Obtain a receipt for all contributions.
- Ensure the charity is a recognized tax-exempt organization.
- Donate Appreciated Assets: Instead of giving cash, an alternative is donating appreciated stocks, mutual funds, or other investments. Doing so may allow you to avoid paying capital gains taxes while still claiming the full value of the donation as a deduction.
- Consider Qualified Charitable Distributions (QCDs): If you’re over 70½, you can make a Qualified Charitable Distribution directly from your IRA. QCDs allow you to satisfy your Required Minimum Distributions (RMDs) without increasing your taxable income.
If you would like to pursue any of these year-end charitable giving options, give us a call at the office and we will help you in any way we can.