October 30, 2024
As the holiday season approaches, Allworth financial advisor Michael Coates, CFP®, shares some of the best ways you can give to your favorite causes while also maximizing your tax savings.
As we enter a season often marked by reflection and generosity, many of us start thinking about the ways we can give back—to our loved ones, our communities, and the causes that matter most. Charitable giving and gifting can go far beyond a simple act of kindness. With the right strategy, your contributions can also play an important role in your overall financial plan and legacy.
Whether you’re looking to maximize the impact of your charitable donations, minimize taxes, or support loved ones, thoughtful gifting strategies can ensure you’re giving with purpose. Let’s explore four powerful ways to gift and contribute that align with your values and financial goals.
One of the most tax-efficient ways to give is through donating appreciated securities, such as stocks or bonds. If you’ve held an investment for over a year and it has increased in value, you can donate the asset without having to pay capital gains taxes.
Not only do you avoid capital gains, but you can also receive a charitable deduction for the fair market value of the asset. This strategy allows you to give more than if you had sold the investment and donated the proceeds. By donating appreciated securities, you help the causes you care about while benefiting your tax situation—making it a win-win for you and the charity.
If you’re over the age of 70½, you’re likely familiar with the required minimum distributions (RMDs) from your IRA. What you might not know is that you can make a Qualified Charitable Distribution (QCD) directly from your IRA to a qualified charity. This allows you to count the distribution toward your RMD without having it included in your taxable income.
A QCD is a great option if you’re charitably inclined and want to lower your taxable income. You can donate up to $100,000 per year ($200,000 for couples), which can be especially beneficial if you don’t need the income from your RMDs but still want to fulfill your charitable goals.
If you have property that you’re not using or no longer need, donating real estate to a charity can be an impactful way to give. Whether it’s undeveloped land or property that you’re still living on, you have options to donate now or through your estate plan.
Donating real estate provides several benefits. First, you avoid the capital gains tax that would be triggered by selling the property. Second, your estate may benefit from reduced estate taxes. If you’re looking for a long-term way to make a significant impact, donating real estate can be a smart way to align your assets with your charitable goals.
Estate planning isn’t just about distributing assets to heirs; it’s also an opportunity to incorporate charitable giving into your long-term legacy. By naming a charity as a beneficiary of your IRA, you can provide meaningful support to the causes you care about while reducing the tax burden on your estate.
When a non-profit is named as the beneficiary of your retirement accounts, they receive the full value without being subject to income taxes. This ensures that 100% of your contribution goes directly toward making a difference. Additionally, this strategy can help reduce estate taxes, allowing your heirs to benefit from other assets in your estate.
Gifting strategies can be a powerful way to not only support the people and causes that matter to you but also enhance your financial plan. Whether you’re considering donating securities, making qualified charitable distributions from your IRA, or incorporating charitable giving into your estate plan, there are numerous ways to maximize the impact of your generosity.
If you're interested in exploring any of these strategies further, I’m here to help you make informed decisions that align with your values and long-term goals. Let’s work together to ensure that your giving is as impactful as possible.
Many of the clients I work with choose me because I’m a collaborative financial partner during the later years of their careers. When you’re in the final era of your work life, you need an equitable relationship with your financial advisor, so you feel empowered to make educated decisions that set you up for lasting financial success.
If you’re feeling uncertain about how to prioritize your goals, I’ll help to develop a path to get you to retirement in the most efficient way possible.
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