Year-End Charitable Gifting: Strategies to Maximize Impact

As the year winds down, many of us turn our attention to giving, whether to support causes we care about or to optimize our personal finances. With a little planning, charitable gifts can serve a dual purpose: they benefit the organizations you care about and, in some cases, help reduce your tax burden. Here’s a closer look at strategies that can help you maximize your impact.

Donating cash or writing a check is one of the easiest ways to give. While these gifts reduce your taxable income, the benefit is generally limited to the value of the donation itself. Still, cash donations remain a simple and flexible way to support your favorite organizations.

If you have investments that have appreciated in value, donating them directly to a charity can be even more advantageous than a cash gift:

• You provide the same gift amount to the charity as you would with cash.
• You will avoid paying capital gains taxes on the appreciated value.
• This strategy can effectively reduce your overall tax burden and manage concentrated positions in your investment portfolios.

For individuals age 70½ or older, a QCD allows you to contribute directly from your IRA to a charity:

• Distributions count toward your required minimum distribution (RMD).
• The amount distributed is not included in taxable income.
• You do not need to itemize deductions to receive the benefit, making this a convenient option for many retirees.

Bunching is the practice of consolidating multiple years’ worth of charitable contributions into a single tax year:

• Can help you exceed the standard deduction threshold, allowing you to itemize deductions in a year you otherwise could not.
• Leveraging a donor-advised fund allows you to make a large gift in a single tax year and then spread that gift out over multiple years.

It’s also important to differentiate between charitable giving and family gifting:

• Charitable donations can reduce your taxable income.
• Gifts to family members, such as contributions for college or personal expenses, do not provide a deduction but can reduce the size of your taxable estate.
• Annual exclusions (currently $19,000 per recipient) allow you to give without affecting your lifetime estate tax exemption.

Even small decisions can make a significant difference. By considering the timing, method, and type of gifts, you can:

• Maximize the impact of your generosity.
• Take advantage of potential tax benefits.
• Ensure your giving aligns with both your values and your broader financial goals.

With thoughtful planning, your charitable gifts can do more than support the causes you care about; they can also enhance your financial flexibility and long-term planning. For guidance on year-end gifting strategies and other wealth planning opportunities, Bradley, Foster & Sargent is here to help you make the most of your financial goals.