5 Tips for Charitable Giving

If you're someone who regularly gives to charity, here are five must-knows before completing your charitable gifting for 2024.

1. Do Your Research

Understanding the charity’s mission and true purpose is key when contributing. Knowing the impact of the organization and the outcomes of its programming might help determine what and how much you give. You can start your research by using websites such as Guidestar and Charity Navigator, which provide a detailed understanding of the nonprofit.

The organization you’re involved with should also be able to provide registration information including 501(c)(3) or Section 170(c) status, which is required to ensure your donation is tax-deductible. You can cross-reference the tax-exempt organization search tool available on the IRS website to obtain specific information. Below is a sample group of organizations whose contributions are typically tax deductible, but it’s always a good idea to confirm with your CPA:

2. Bundle Your Donations

You may choose to save money over time and donate every few years as opposed to each year consecutively. At Stratos Private Wealth, we think that tax deduction “stacking,” including bundling donations, is a key tax-saving strategy for higher earners. When you stack several years of charitable contributions into one tax year, you might be able to generate enough of a deduction to itemize and deduct more than the standard deduction affords.

A donor-advised fund is one way to group your charitable deductions without bundling the gifts to a specific charity. This strategy allows you to make a larger, upfront charitable donation, receive an immediate tax break, and then use recommended grants from the fund for your preferred charities over time.

3. Donate Appreciated Stock

While giving a cash value might feel like the most straightforward way to contribute, there may be other forms of assets you can donate in order to maximize your gifting. By donating stocks or other appreciated assets directly, you may avoid the capital gains that you would otherwise be taxed on when assets are sold.

In particular, high-income earners might consider a non-cash donation because of the tax advantages they may be awarded at high tax rates. Even those who have what they might consider to be small holdings could benefit by making a donation of appreciated investments.

4. Utilize Your IRA for a Qualified Charitable Distribution

If you’re a retiree over the age of 70.5, you might consider transferring money from your IRA directly to a qualifying charity by making a qualified charitable distribution. This IRA distribution, which would typically be taxable, is excluded from taxable income when moved directly to the charity. These distributions can be a tax-efficient way of meeting any Required Minimum Distributions and contributing to a cause that you care about.

According to the National Association of Enrolled Agents, you may distribute up to $105,000 per year per taxpayer. This increases to an acceptable $210,000 for married couples if they both have IRAs. Although this strategy has existed for some time, it only recently became a part of the permanent tax code.

5. Consider an Employer Match for Charitable Gifts

Often, companies encourage their employees to give back to their communities by matching contributions. Check with your human resources department about these options prior to contributing to maximize your gifts.

Clients of Stratos Private Wealth can benefit from our year-end planning tools. We can model possible charitable contributions in the scope of the rest of your investment and financial planning strategies, including gifts, Roth conversions, realized gain/loss, etc., and then work with your CPA to finalize the strategies before executing. As always, we review these opportunities with clients on an individual basis during our normal review meetings, but please feel free to reach out if you have any questions or are considering a change in strategy.

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Disclosures:

Stratos Private Wealth is a division through which Stratos Wealth Partners, Ltd. markets its wealth management services. Stratos Wealth Partners, Ltd. is a registered investment advisor. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Investing involves risks including possible loss of principal. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The above illustration is based on various assumptions and is for informational purposes only. You should consult your tax and/or legal advisors before implementing any transactions and/or strategies concerning your finances.