Tax-Efficient Ways to Show Gratitude Through Charitable Giving

The Spirit of Gratitude 

Before diving into the financial aspects, let's take a moment to appreciate the true spirit of Giving Tuesday. This day of giving reminds us to look beyond ourselves and consider how we can make a positive difference in our communities and the world at large. Whether you choose to donate money, time, or resources, the act of giving is a powerful way to express gratitude for the abundance in our own lives. 

As financial advisors, we are privileged to work with clients who embody this spirit of generosity year-round. We have seen firsthand how charitable giving can bring joy and purpose to our clients' lives, while also serving as a key part of their overall financial strategy.  

If you’d like to do the same, consider these tax-efficient ways to give back this Giving Tuesday.

Donate Appreciated Stocks 

One of the most tax-efficient ways to give is by donating appreciated stocks, mutual funds, or other securities that you have held for more than a year. When you donate these securities directly to a qualified charity: 

• You avoid paying capital gains tax on the appreciation 
• You can deduct the full fair market value of the securities (up to 30% of your adjusted gross income) 
• The charity receives the full value of your donation 

This strategy allows you to give more to charity while potentially reducing your tax bill compared to selling the securities and donating the cash proceeds. 

Consider a Donor-Advised Fund 

A donor-advised fund (DAF) is like a charitable investment account that allows you to contribute cash, securities, or other assets, take an immediate tax deduction, and then recommend grants to your favorite charities over time. Benefits of a DAF include:

• Immediate tax deduction in the year of contribution 
• Potential for tax-free growth of the donated assets
• Flexibility to support multiple charities over time
• Ability to donate anonymously if desired

DAFs can be particularly useful for those looking to "bunch" multiple years of charitable giving into a single tax year to maximize itemized deductions.

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Qualified Charitable Distributions from IRAs 

For those aged 70½ or older, making a Qualified Charitable Distribution (QCD) directly from your IRA to a qualified charity can be an excellent giving strategy. QCDs offer several advantages: 

• Counts towards your Required Minimum Distribution (RMD) if you are 73 or older 
• Excluded from your taxable income (up to $100,000 annually) 
• Allows you to give pre-tax dollars to charity 

This strategy can be especially beneficial for those who do not itemize deductions, as it effectively allows you to deduct your charitable giving without itemizing. 

Establish a Charitable Remainder Trust 

For larger gifts, consider establishing a Charitable Remainder Trust (CRT). With a CRT, you donate assets to the trust and receive income for a set period. At the end of that period, the remaining assets go to your chosen charity. Benefits include: 

• Immediate partial tax deduction 
• Potential income stream for you or your beneficiaries 
• Estate tax benefits 
• Support for your favorite causes 

While more complex, a CRT can be an excellent tool for those looking to make a significant charitable impact while also addressing their own financial needs.

Give Your Time and Expertise 

Remember, charitable giving is not just about money. Volunteering your time and expertise can be just as valuable and sometimes more valuable to many organizations. While not tax-deductible, the intangible rewards of volunteering can be immeasurable. Our team at WHZ volunteers at several organizations local to our offices here in Connecticut, including TEEG, the Hale YMCA, the Putnam Business Association, several nonprofit boards, and in other ways. Consider how you might use your professional skills or personal passions to make a difference in your community this Giving Tuesday. 

As we celebrate Thanksgiving, with Giving Tuesday not far behind on December 3rd, remember that effective charitable giving is about more than just the amount donated – it’s about maximizing the impact of every dollar given. By employing tax-efficient giving strategies, you can potentially increase your charitable impact while also optimizing your personal financial situation. 

Whether you are looking to make a one-time donation or develop a long-term charitable giving plan, our team is here to help you navigate the financial aspects of philanthropy. Together, we can create a giving strategy that reflects your values, supports your favorite causes, and integrates seamlessly with your overall financial plan. Contact us to discuss how we can help you make the most of your charitable contributions and provide you with “Absolute Confidence. Unwavering Partnership. For Life.” Call (860) 928-2341 or book a complimentary consultation on our website at www.whzwealth.com.      

Authored by Associate Vice President, Wealth Advisor Holly C. Wanegar, CFP®. 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. WHZ 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.