Michael Baum, CFP® RICP®
Vice President & Associate Financial Advisor
While tax day is still months away, it’s smart to start preparing for it now. Why? Depending on your financial situation, you may be able to pay less taxes by leveraging a smart year-end charitable giving strategy – allowing you to make an impact on the causes you care about instead of paying more to Uncle Sam.
If you’re not sure how your finances match up with a potential year-end giving strategy, now is the time to prepare by making your lists and checking them twice. Organization is key to proper gifting this holiday season. Follow the five tips below to help maximize your charitable giving strategy this year.
1. Do Your Research
You can learn more about the groups you’re interested in donating to by using sites such as Guidestar or the Better Business Bureau’s Wise Giving Alliance. The organizations you’re involved with should also be able to provide registration information, including 501(c)(3) status and tax identification numbers. You may also use the tax-exempt organization search tool available on the IRS website to obtain more specific information about such organizations.
2. Bundle Your Donations
As deductions have increased over the years, you may choose to save money over time and donate every few years as opposed to consecutively each year. By doing this, you may receive itemized deductions that go over the limit one year and take the standard deduction the next.
If you’re interested in accomplishing this, you might consider a donor-advised fund that allows you to make a charitable donation and immediately receive a tax break. Then, your preferred charities will receive grants from the fund over time.1
3. Donate Appreciated Stock
By donating stocks or other appreciated assets, such as artwork or antiques, you might reduce capital gains taxes on investments.2
In particular, high-income earners specifically might consider a non-cash donation because of the tax advantages they may be awarded. Even those who have what they might consider small holdings could benefit by making a donation of appreciated investments this holiday season.
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4. Utilize Your IRA
If you’re a retiree over the age of 70½, you might consider transferring money from your IRA to a qualifying charity. These distributions can be a tax-efficient way of meeting any required minimum distribution. Additionally, there’s no need to itemize your deductions to benefit.
Each taxpayer may distribute up to $100,000 annually ($200,000 for married couples if both have IRAs.3 ) Although this strategy has existed for some time, it has only recently become a part of the permanent tax code.
5. Monitor and Evaluate Your Portfolio
No matter the size of your seasonal contributions, it’s always important to keep up-to-date knowledge on your portfolio to give properly and confidently. Staying informed through newsletters, annual reports, and CEO updates can be an important factor when it comes to understanding the operations of various organizations.
It’s important to set personal reminders, at least annually, to re-evaluate your financial and personal priorities and update them, if need be. Your interests and priorities are bound to change over time, and so will the causes you choose to support. Being aware of these fluctuations is key, and maintaining a thoughtful attitude is what makes the holidays meaningful.
At WHZ, we actively give back to our community and find ways to help others Live Well. See how we can empower you to reach your own goals for supporting the causes you care about while also staying on track toward the big goals you have for your own future through our Plan Well, Invest Well, Live Well™ strategic financial planning process. For more tips about charitable giving, contact us for a complimentary consultation by calling (860) 928-2341, or request one on our website.
Authored by Vice President, Associate Financial Advisor, Michael Baum, CFP® RICP®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.