Charitable giving doesn’t have to mean paying more in taxes. With strategic planning, you can maximize your philanthropic impact while reducing your tax burden. Whether you no longer itemize deductions, hold appreciated stock, or are in retirement, these three tax-efficient charitable giving strategies can help you donate more effectively while optimizing your tax situation.
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Helping families support charitable causes they care about is one of the top pleasures of my career. I like it even better when we can do it in a way that creates a tax win. Here are some great strategies that help optimize giving depending on your situation.
I no longer itemize deductions, or barely reach the limit to itemize.
Fewer than 10% of taxpayers itemize these days, and it often takes $15,000+ of donations for a taxpayer to see any benefit compared to itemizing. Donors in that category can make multiple years of donations via a donor-advised fund. Instead of donating $20,000/yr, say they donate $80,000 at once. It’s all deductible in year one, and the funds can be granted out to charities at their leisure over a period of years.
I have appreciated stock that represents a substantial tax bill if I sell.
We see a lot of long-term investors who are reluctant to sell and recognize gains. Most charities are thrilled to accept gifts of stock because they can sell the stock and not pay tax on the gains. We often help clients use this strategy to diversify their portfolio or establish a new basis that increases future flexibility. This can also be paired with a donor-advised fund.
I am retired and likely not to itemize deductions ever again.
No working income, no mortgage interest- that’s a great place to be every day except the day you hope to count up tax deductions. Most people in this situation have substantial retirement assets in 401k’s or IRAs. Donors age 70 ½ + can donate up to $108,000/yr from an IRA and not pay tax by utilizing a Qualified Charitable Distribution (QCD).
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About Ballast
Ballast, an employee-owned financial planning and investment management firm based in Lexington, KY, specializes in providing tailored services to high-income earners, high-net-worth clients, and individuals/businesses with complex financial situations. Our team of fiduciaries proactively anticipates and solves your needs by taking the time to understand your goals, passions, and what truly matters to you and your legacy. Ballast is built for financial security by financial experts. You work hard every day. Let us take on some of the work for you.
Disclosure
Ballast, Inc. is a registered investment adviser with the SEC. Registration with the SEC does not indicate that the adviser has achieved a particular level of skill or ability, nor is it an endorsement by the SEC. All investment strategies have the potential for profit and loss. Ballast, Inc. is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Any specific strategy or market/economic commentary may or may not be appropriate for your individual situation, may not have discussed all material implications of implementing said strategy, and may be reliant on data provided by outside resources. Before implementing any strategy or investment decision discussed in a Ballast commentary, please consult with the appropriate professionals to confirm the thoroughness of the strategy presented and its appropriateness for your individual situation.