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Are you prepared for the upcoming giving season? Year-end will be here before you know it, and in order to minimize stress and maximize your gifting abilities, it’s important to keep a few details in mind. Consider some or all of these five “must-knows” before completing your charitable gifting for 2020.

1. Do Your Research

Understanding the charity’s mission and true purpose is key when contributing. Knowing the impact of the organization and the outcomes of its programming might help determine what and how much you give. You can start your research by using websites such as Guidestar and Charity Navigator, which provide a detailed understanding of the nonprofit.

The organization you’re involved with should also be able to provide registration information including 501(c)(3) or Section 170(c) status, which is required to ensure your donation is tax-deductible. You can cross-reference the tax-exempt organization search tool available on the IRS website to obtain specific information. Typically, you can take a tax deduction for contributions made to the groups below, but it’s always a good idea to confirm with your CPA:

  • Churches and other religious organizations
  • American Red Cross, Goodwill, the Salvation Army, and CARE
  • Tax-exempt educational organizations
  • Tax-exempt hospitals and some medical research organizations
  • Government agencies, such as a state or division of a state if the funds are used for public purposes
  • Nonprofit volunteer fire companies
  • Some veterans’ groups and fraternal societies
  • Some private foundations that distribute the contributions they receive to public charities, and some private operating foundations
  • Some membership organizations that receive more than a third of their contributions from the general public
  • Boy Scouts and Girl Scouts of America
  • Boys Clubs and Girls Clubs of America

2. Bundle Your Donations

You may choose to save money over time and donate every few years as opposed to each year consecutively. At BWM Financial, we think that tax deduction “stacking, including bundling donations, is a key tax-saving strategy for higher earners. By doing so, you may utilize your itemized deductions one year and take the standard deduction the next.

A donor-advised fund is one way to group your charitable deductions without bundling the gifts to a specific charity. This strategy allows you to make a larger, upfront charitable donation, receive an immediate tax break, and then use recommended grants from the fund for your preferred charities over time.

 3. Donate Appreciated Stock

While giving a cash value might feel like the most straightforward way to contribute, there may be other forms of assets you can donate in order to maximize your gifting. By donating stocks or other appreciated assets directly, you may avoid the capital gains that you would otherwise be taxed on when assets are sold.

In particular, high-income earners might consider a non-cash donation because of the tax advantages they may be awarded at high tax rates. Even those who have what they might consider to be small holdings could benefit by making a donation of appreciated investments.

4. Utilize Your IRA for a Qualified Charitable Distribution

If you’re a retiree over the age of 70, you might consider transferring money from your IRA directly to a qualifying charity through a process called a qualified charitable distribution. The IRA distribution, which would typically be taxable, is excluded from taxable income when moved directly to the charity. These distributions can be a tax-efficient way of meeting any Required Minimum Distributions and contributing to a cause that you care about. Additionally, there’s no need to itemize your deductions in order to benefit.

According to the National Association of Enrolled Agents, you may distribute up to $100,000 per year per taxpayer. This increases to an acceptable $200,000 for married couples if they both have IRAs. Although this strategy has existed for some time, it only recently became a part of the permanent tax code.

5. Consider an Employer Match for Charitable Gifts

Often companies encourage their employees to give back to their communities by matching contributions. Check with your human resources department about these options prior to contributing in order to maximize your gifts.

Clients of BWM Financial can benefit from our year-end planning tools. We can model hypothetical charitable contributions in the scope of the rest of your investment and financial planning strategies, including gifts, Roth conversions, realized gain/loss, etc., and then work with your CPA to finalize the strategies before executing. As always, we review these opportunities with clients on an individual basis during our normal review meetings, but please feel free to reach out if you have any questions or are considering a change in strategy.

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This content is developed from sources believed to be providing accurate information, and provided by BWM Financial. It may not be used for the purpose of avoiding any federal tax penalties

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.