‘Tis the Season: How to Give to Charity While Maximizing Tax Advantages


When Jeffrey Weiner, investments managing director at Benjamin F. Edwards, works with individuals who are interested in giving to charity, he asks them to take a step back and think about what they’re trying to accomplish.

(Courtesy of Jeffrey Weiner)

“Do you want to prioritize giving bigger amounts of support to a few charitable organizations that are most important to you, or do you want to make contributions in support of a wider range of causes they think are worthwhile?” Weiner said.

“Will this be a one-time donation, or do they want to develop a philanthropic giving plan to make ongoing donations?”

Those interested in charitable giving may want to involve their spouse and family in determining how to proceed, Weiner said.

Understanding tax strategies related to charitable contributions can help determine how much to give, what asset to give and when to give, in order to maximize the amount to charity—and receive the maximum tax advantages, Weiner said.

For example, only gifts to qualified charitable organizations are eligible for a tax deduction.

“There may be limitations on the amounts that are deductible; there can be record-keeping requirements,” Weiner said. “You generally need to itemize deductions on your tax return to receive tax benefits.”

Individuals use various methods and vehicles to maximize the tax benefits of making charitable donations. “They may choose to donate appreciated securities (in kind.) When actual shares are donated, taxes don’t have to be paid on unrealized gains, and a deduction can be taken for the full value of the securities donated,” Weiner said.

Another method done frequently is the use of qualified charitable distributions from IRAs.

Charitable gift funds, more commonly referred to as donor-advised funds, are another popular giving vehicle. The funds can grow tax-free inside the donor-advised fund, and the donor then can make recommendations in subsequent years for the funds to be paid out to other charities of their choice.

Sometimes, Weiner’s clients want to use other gifting strategies customized to meet individualized goals. “Charitable gift annuities, typically offered directly from the charitable organization, allow you to receive an income stream during your lifetime, with the remainder assets passing to the charity,” Weiner said.

Clients can take a charitable deduction for the estimated remainder, passing to charity through a complex actuarial calculation provided by the annuity provider, Weiner said.

There are more sophisticated gifting vehicles, for which the rules are more complex. Tax and legal advisers should be consulted in connection with such charitable giving structures.

Tax laws and regulations change periodically, so you should consult with a tax professional or financial adviser who can provide up-to-date information and guidance tailored to your specific circumstances.

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