As the year draws to a close, many individuals and families consider year-end charitable giving. This is a time when you have a chance to make a significant impact on the causes that matter most to you, while also making smart financial decisions. This article will provide a guide to effective year-end giving strategies, helping you navigate the various options and maximize your philanthropic impact, and tax benefits.
Why Give at Year-End?
The end of the year is a perfect time to consider charitable giving for a variety of reasons:
- Tax Benefits: Donations made before the end of the year can be included in your tax deductions for that particular year.
- Budget Planning: You have the ability to align your year-end donations with your budget planning.
- Timing: For most charities, the end of the year is a crucial time for donations, and having a clear plan in place ensures your donations will be received when they are needed most.
- Personal Reflection: The end of the year allows you time for personal reflection, allowing you to re-evaluate your values and decide where to give your support.
Strategies for Maximizing Impact
Here are a few strategies to make your year-end charitable giving as impactful as possible:
- Review Your Budget: Look at your finances and identify how much you are able to contribute at the end of the year, and choose how to allocate that generosity.
- Select Your Charities: Take the time to select the charities that align best with your values and will have the greatest impact.
- Plan Ahead: Planning ahead for the next year allows you to create a long term giving plan, and avoid rushing your decisions.
Making Tax-Savvy Donations
It is important to plan your donations in a way that benefits both the charity and your financial well being.
- Itemize Deductions: Make sure that your charitable giving and other itemized deductions surpass your standard deduction. If they do not, then you may not be able to take any deductions for that year.
- Bunching Donations: If you plan on donating annually, “bunching” multiple years of donations into one year can be an effective way to maximize your tax deductions.
- Non-Cash Donations: Donating appreciated stock or other assets allows you to avoid capital gains tax, while also receiving a deduction for the fair market value of your gift.
Qualified Charitable Distributions (QCDs)
If you are over 70.5 and have a retirement account, it may benefit you to take advantage of Qualified Charitable Distributions (QCDs). A QCD will be transferred directly from your retirement account to a qualified charity, and can be counted toward your Required Minimum Distribution (RMD) without increasing your adjusted gross income.
The Importance of Documentation
Make sure that you are always documenting your gifts, so that they are eligible for tax deductions. You should:
- Get Receipts: Keep documentation for all of your charitable donations. A canceled check, or a receipt directly from the organization is vital.
- Document Non Cash Donations: For any assets or items that you donate, ensure you document the fair market value, and consider obtaining a professional appraisal to document the value of your gift.
- Consult a Tax Professional: The tax code can be complex, so consult with a tax professional to determine the best path for your donations.
Beyond Financial Giving
While financial donations are often very important, you can also make a big difference through volunteering and other donations:
- Volunteer Your Time: Consider volunteering your time to a charity, as they often have a great need for help, especially at the end of the year.
- Donate Goods: You can donate items the charities need for their work, such as new clothing, non-perishable food, or toys. Always check with the organization to see their most immediate needs.
- Promote Their Mission: Using your voice to amplify their mission and to educate others can be incredibly helpful for any organization.
Wills.com and Charitable Giving
Wills.com is here to support your year-end charitable giving goals, by making sure that you have a clear plan for your donations, and that your giving will have a lasting impact beyond this year. With a Wills.com Lifetime Membership, you can easily update your will to accommodate all of your planned year-end giving, or other changes you wish to make in your estate plan.
We also offer the ability for charities to set up a Business Charity Account, so they can make it easy to onboard donors who wish to make planned gifts though their wills or trusts.
Frequently Asked Questions
- Q: What should I do if I cannot decide on which charity to donate to?
- A: Make your donation to a Donor Advised Fund, which allows you to distribute your donations over time to multiple charities.
- Q: How can I find reputable charities to donate to?
- A: Research charities using Charity Navigator and GuideStar, and make sure you only donate to qualified 501(c)(3) organizations.
- Q: Should I wait until the end of the year to donate?
- A: You should donate when it makes the most sense for you, but year-end planning allows you to strategize and make informed decisions.
- Q: What if I do not itemize my deductions, will year-end giving still benefit me?
- A: While you may not be able to claim a deduction, donating to charity has many personal and societal benefits, beyond any potential tax benefits.
Conclusion
Year-end charitable giving can be a powerful way to align your financial goals with your philanthropic intentions. By carefully planning your donations, you can maximize your impact on the causes you care about, while also taking advantage of the various tax benefits associated with charitable giving. Remember to document all of your gifts, and choose ways to make your giving as effective and meaningful as possible. It’s time to create a more positive impact on the world.
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Disclaimer: This article is for informational purposes only and does not constitute legal advice. For personalized guidance, consult an attorney or visit the Wills.com Learning center.