Tis the Giving and Tax savings Season

As the holiday season rapidly approaches, with it comes the “season of giving”. Many people

look for ways to support causes they care about, and this "giving season" also brings

opportunities for significant tax savings. Whether you're donating cash, appreciated assets, or even goods, charitable contributions can offer tax advantages by reducing your taxable income. Here are ways your season of giving can have tax saving by maximizing the benefits of both cash and non-cash donations to qualified charities before the year ends. And you will feel good doing it.

Cash Donations: Immediate Deductions for Quick Impact

Cash donations are straightforward and often the easiest way to support charitable organizations:

• Itemized Deductions: Cash donations to qualified charities are deductible if you itemize, rather than taking the standard deduction. By itemizing, you can directly lower your taxable income.

• 60% AGI Limit: For most taxpayers, cash donations to public charities are deductible up

to 60% of your Adjusted Gross Income (AGI). If your contributions exceed this limit,

you can carry forward the excess deduction for up to five years.

Non-Cash Donations:

In addition to cash, donating non-cash assets like stocks, real estate, other investments or

tangible goods can offer unique tax benefits:

Appreciated Assets (stocks, real estate. etc.)

• Avoiding Capital Gains Taxes: When you donate appreciated assets, you avoid paying

capital gains taxes on the appreciation. This can save you up to 20% in capital gains tax,

depending on your tax bracket.

• Double Tax Benefits: In addition to avoiding capital gains tax, you can also deduct the

full fair market value of the asset if you’ve held it for more than a year. This double tax

benefit makes appreciated assets one of the most effective ways to give to charity.

Tangible Goods

Donating items like clothing, household goods, or vehicles can also provide tax benefits, though a few rules apply:

• Qualified Organizations Only: To claim a deduction, donations must be made to

qualified charitable organizations. Contributions to individuals, even if they’re in need,

do not qualify.

• Fair Market Value: You can generally deduct the fair market value of items in “good

used condition or better.” For larger items like vehicles, you may need to include

additional documentation or meet specific requirements from the charity.

• Deduction Limits: Non-cash donations are subject to a 30% AGI limit if you’re giving

assets directly to public charities, or 20% if they’re directed to certain types of

foundations.

Qualified Charitable Distributions (QCDs): A Strategic Option for IRA Holders

For those aged 70½ or older, a Qualified Charitable Distribution (QCD) allows you to make a

tax-free donation directly from your IRA:

• Tax-Free Giving: QCDs are not counted as income, so they reduce your taxable income,

especially useful if you’re no longer itemizing your deductions.

• Satisfies RMD: QCDs can satisfy your Required Minimum Distribution (RMD) if you’re

73 or older, reducing the amount you’d otherwise need to withdraw—and be taxed

on—for the year.

Donor-Advised Funds (DAFs): A Flexible Giving Vehicle

A Donor-Advised Fund (DAF) lets you contribute now and recommend grants to charities later. This vehicle is particularly helpful for maximizing deductions in high-income years:

• Immediate Deduction: You get a deduction for the full contribution in the year of the

gift, regardless of when the funds are disbursed to charities.

• Flexible Assets: You can donate appreciated securities, real estate, or other assets to a

DAF, maximizing tax savings through deductions and capital gains avoidance.

Bunching Contributions: Maximizing Deductions in High-Standard Deduction Years

With the standard deduction now significantly higher ($14,600 for single filers, $29,200 for joint filers, and $21,900 for heads of household in 2024), many taxpayers may find it harder to benefit from itemizing each year. By bunching charitable contributions into one tax year, you can exceed the standard deduction and make the most of your itemized deductions.

Things to remember for Charitable Contributions

To ensure your contributions qualify for a deduction, follow these steps:

• Check for Qualified Status: The IRS requires charities to be registered 501(c)(3)

organizations to qualify for tax-deductible contributions.

• Obtain Documentation: For any gift over $250, you’ll need a written acknowledgment

from the charity. Keep receipts and any relevant tax forms for contributions, especially

for non-cash donations.

• Donate by December 31: Contributions must be made by the last day of the year to

count toward that year’s tax return, whether you’re giving cash, securities, or tangible

items.

The Gift That Gives Back

End-of-year charitable contributions are a powerful way to support your community while

reaping valuable tax benefits. By taking advantage of tax deductions for cash, non-cash assets, and even qualified distributions, you can make a meaningful impact and set yourself up for a more favorable tax outcome.