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‘Tis the Season for Giving: Five Ways to Make the Most of Your Annual Financial Donations

By: Frances Cronlund, CIMA®, CExP™, CTFA, CFP®
3 Minute Read

November and December are popular months for many individuals to express gratitude and community support through philanthropic donations. While the holiday season is often marked by generosity and unity, it is also advantageous for financial gift-giving from a practical perspective. During these months, donors have a comprehensive view of their financial health throughout the year and can make financial decisions that benefit both the recipient and the benefactor through philanthropic contributions and subsequent tax deductions.

For individuals who plan to make donations this season, there are five popular ways to provide financial gifts to charitable organizations that provide different benefits for the giver when filing taxes. By understanding the various ways to contribute, donors can make the most of the gift for their own bottom line.

Five Ways to Give

  1. Cash or Check
    Donations by cash or check are the simplest (and most popular) form of financial contribution. Donors simply need to ensure that they receive a receipt for their contributions and use it to calculate deductions when filing yearly taxes.
  2. Appreciated Securities
    Individuals who have more complex assets may choose to make financial donations of appreciated securities. By investing a smaller amount to a stock or mutual fund and waiting for the asset to appreciate prior to donation, benefactors may avoid capital gains tax and may receive a tax deduction based on the full market value on the date of the gift—typically larger than the original investment amount.

  3. IRA Distributions
    If the donor is over 70 ½ years old, they are permitted to make a qualified charitable distribution (QCD) of up to $100,000 per year through their IRA. With a QCD, the donated amount is sent directly to the charity of choice and satisfies IRA minimum required distributions, ultimately lowering the amount of taxes paid on these distributions. In addition, donating a portion of the distributions can lower taxable income, which influences Medicare premiums. Donors should keep in mind that charitable contributions cannot be made from a 401k account. For individuals who wish to donate to a charity from a 401k, they must first roll funds from this account to an IRA.

  4. Donor-Advised Fund
    Individuals who wish to receive an immediate tax deduction based on multiple years of future donations may choose to use a donor-advised fund (DAF). This type of fund functions similarly to a personal or private foundation but typically requires low minimum contributions. A DAF allows the benefactor to pre-fund the account with any dollar amount and distribute as they wish in subsequent years. Through this method, the donor can receive a tax deduction of the full amount in the year the DAF is funded and potentially lower their projected tax bracket based on that year’s income. This method is also particularly flexible, as the fund’s owner can change the charitable recipient(s) and the amount given each year.

  5. Charitable Trust
    A charitable trust can be implemented in one of two ways: after the trust is established, the donor can choose to either contribute the yearly income it produces to a charity of their choice and receive the remainder of the funds at the end of the term, or they can choose to provide a non-charitable beneficiary with the yearly income it produces and donate the remainder of the funds to a charity of their choice at the end of the term. Both methods can provide an immediate tax deduction at the time of establishment while also providing the benefit of a return of funds to themselves or a beneficiary at a future date.

Working with a financial professional can help you learn how to contribute to the causes that matter to you while still building and maintaining your wealth. For more information about charitable giving and financial planning, please reach out to Curi Capital’s Wealth Management team at 984-202-2800.

 

Curi Capital is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC. Curi Capital only transacts business in states or jurisdictions in which it is properly registered or exempt from registration. A copy of Curi Capital’s current disclosure brochure, which describes, among other things, Curi Capital’s business practices, services, and fees, is available through the SEC’s website at www.adviserinfo.sec.gov.

The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein.

Frances Cronlund, CIMA®, CExP™, CTFA, CFP®

Frances Cronlund is Curi Capital’s Senior Director of Wealth Planning, based in Raleigh, NC.

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