Smart Charitable Giving Strategies - Adviser Investments

Smart Charitable Giving Strategies

We’ve talked before about how charitable giving can lower your annual tax bill. Here, we’ll mention four smart charitable giving strategies to help you give.

  1. Direct cash donations. Perhaps not the most tax-efficient giving strategy, but it is the simplest. Giving cash is often the easiest way to make a charitable contribution, both for you and the charitable organization you’re supporting. From a tax standpoint, cash donations can be deducted from your adjusted gross income (AGI)—up to a limit of 60% of your AGI each year.
  2. Stock donations. It’s rewarding (literally) to watch the stocks you own rise in price. Paying the capital gains tax—20% on the sale of shares if your total taxable income exceeds $459,750 ($517,200 for married couples filing jointly)—is not so rewarding. And that’s before state and local taxes. One way to avoid those taxes is by gifting appreciated stock to a charity directly rather than pledging the cash from the proceeds. The benefit is twofold: You avoid paying capital gains, and you can deduct the full value of the shares from your taxable income—up to 30% of your AGI in the current tax year.
  3. Donor-advised funds (DAFs). This option, another smart charitable giving strategy, is like having your own personal foundation, combining the ease and simplicity of cash and securities donations with the longevity and flexibility of more complex charitable vehicles. In this case, you contribute cash or highly appreciated stocks to the DAF and receive an immediate tax deduction. Once the DAF is funded, you can direct those funds to charitable organizations immediately or defer making specific grants for a while. In the meantime, the funds can be invested in any of several investment options offered by the DAF and grow tax-free. DAFs are also simple to set up and we can help you fund them according to your charitable goals. There are administrative costs, but they tend to be low and are often superseded by the ease and convenience of using a DAF instead of managing individual charitable contributions over the course of the year.
  4. Qualified charitable distributions (QCDs). In lieu of taking RMDs from your IRA account, QCDs allow you to trim your tax bill by directing some or all of that cash to a charity—reducing your AGI up to $100,000 ($200,000 for married couples filing jointly) per year.

Smart charitable giving strategies are great tax-saving moves, but also valuable tools for estate planning. Charitable trusts in particular are handy for families that anticipate leaving a taxable estate. But they’re complicated and come with substantial administrative costs—so check with your tax, investment and estate planning professionals before taking the leap.

Contact your wealth management team and tax professional if you have questions about charitable giving and your specific situation. We’re happy to help. After all, we are The Planner You Can Talk To.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit or call 800-492-6868.

This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be viewed as a recommendation to buy, sell or hold any of them.

© 2023 Adviser Investments, LLC. All Rights Reserved.