Charitable Strategies to Consider Before Year-End
It’s hard to believe that we have begun our descent toward the holidays and giving season. Start making plans now to achieve your charitable goals before year-end. To ensure that charitable contributions are received and processed by December 31, 2024, Waverly asks that all charitable contribution requests be made by November 29th to allow for sufficient time to process the request and for the contribution to be received and cleared by the charitable recipient.
Your charitable strategy can be a powerful force to make a difference for the causes you support while also offering valuable tax and estate benefits. Incorporating these strategies can enhance your philanthropic impact while aligning with your financial objectives.
CHARITABLE STRATEGIES TO CONSIDER:
- Gifting Appreciated Assets: Consider contributing long-term appreciated securities, such as stocks, mutual funds, bonds, or private company stock. Doing so allows you to avoid capital gains taxes and receive a charitable deduction for the asset’s fair market value. This approach maximizes the impact of your gift while providing significant tax savings.
- Donor-Advised Fund (DAF): One of the most efficient ways to donate is through a DAF which is a dedicated charitable investment account. DAFs allow you to make a charitable contribution, receive an immediate tax benefit, and then distribute the funds to charities over time. DAFs provide the flexibility to support multiple charities and involve family members in giving decisions.
- Strategic Timing of Contributions: Align your giving with your financial landscape. For example, during years with higher income, larger contributions can offer substantial tax benefits. This strategy can be especially effective when contributing to a DAF. Alternatively, you could consider charitable bunching to maximize deductions in the current year by accelerating multiple years of charitable giving into a single year. Both strategies require you to itemize deductions to receive the tax benefit.
- Qualified Charitable Distributions (QCDs): Those 70½ years or older can direct up to $105,000 tax-free from traditional IRAs to qualifying charities as QCDs in 2024. QCDs count towards satisfying the annual Required Minimum Distribution (RMD) from an IRA. The amount donated via the QCD is excluded from income, which is unlike regular withdrawals from a traditional IRA. Not only does this help to lower taxes, but it potentially provides other cost savings and benefits related to Social Security and Medicare. The QCD strategy does not require you to itemize deductions to receive the benefit since the QCD amount is excluded from income.
BEST PRACTICES TO CONSIDER:
- Donate to Recognized Charities: Ensure your contributions go to IRS-acknowledged 501(c)(3) charity to qualify for deductions.
- Understand Deduction Limits: Familiarize yourself with the limits on deductions, which typically allow for up to 60% of your adjusted gross income.
- Document Your Contributions: Maintain thorough records of your donations for tax purposes, including copies of W-2s or pay stubs for payroll deductions.
WHICH STRATEGY IS RIGHT FOR YOU?
Before choosing any specific strategy, it is important to first clearly define your charitable goals. Once your charitable goals have been identified, an appropriate strategy or combination of strategies can be designed to accomplish those goals in the most tax-advantageous manner.
As you might expect, there is no one-size-fits-all approach to picking the best charitable giving strategy. Your unique goals and circumstances must be considered when evaluating how to best support your favorite charities. We’re here to assist you in making informed and impactful decisions.
As always, please don’t hesitate to contact a Waverly Team Member with any questions or concerns.
Disclosure: Please Note: The scope of the services to be provided depends upon the needs of the client and the terms of the engagement. A copy of Waverly’s current written disclosure Brochure and Form CRS (Customer Relationship Summary) discussing our advisory services and fees remain available at https://waverly-advisors.com. You should not assume that any information provided serves as the receipt of, or as a substitute for, personalized investment advice from Waverly Advisors, LLC (“Waverly”). This article reflects information available at the time it was written and should be used as a reference only. Talk to your Waverly advisor, or a professional advisor of your choosing, for the most current information and for guidance specific to your situation.