Thanksgiving week is upon us once more! Turkey, stuffing, mashed potatoes, and, most importantly, an attitude of gratitude. While Black Friday deals have been the talk of the town in years past, in recent years, the push to give instead of buy has arguably been even greater. With Giving Tuesday falling right after Thanksgiving, it’s the perfect opportunity for advisors and other financial professionals to talk with clients about year-end charitable donations.
While Giving Tuesday is about more than just money — it can be anything from making a stranger smile, to helping someone in need, to showing up for a cause that’s important to you — fiscal donations are a fantastic way to make a positive impact on an organization that you care about, as well as in the greater community. (And it doesn’t hurt that charitable giving often offers tax breaks!)
If you’ve been considering a year-end charitable gift, here are a few strategies to consider that can help you make the most of your money.
- Establish a Donor-Advised Fund
A donor-advised fund (DAF) is a charitable giving account that allows the donor to make a gift and qualify for a charitable deduction immediately, without needing to decide straight away which charity or charities they’d like to support. Additionally, the money deposited into a DAF can grow tax-free until the donor is ready to recommend a grant.
- Give long-term appreciated securities
Contributing stocks, bonds, or mutual funds that have appreciated over time to philanthropic organizations is another method of charitable giving that has recently gained popularity. For starters, based on a handful of requirements and limitations, publicly traded securities and other types of securities may be tax deductible, with the amount deducted in a single year being up to 30% of the donor’s adjusted gross income. Additionally, gifting shares of company stock can help to diversify a donor’s portfolio.
- Donate complex assets
Another option is to donate complex and illiquid assets directly to charity. These include real estate, restricted stock, private company stock, and even cryptocurrency. Although these types of donations often require additional time and legal advice, they have a relatively low cost basis, which many donors find appealing.
- Consider a bunching strategy
The “bunching” strategy is about maximizing the impact of a donor’s itemized deductions by concentrating deductions in a single year, followed by one or several skipped years. Bunching can work well when a donor’s total itemized deductions for a single year fall below the standard deduction, as contributions for multiple years made at once may exceed the standard deduction and allow for a tax break. Of course, it’s worth noting that this strategy requires the donor to have a significant financial capacity.
Give Back With The Humphreys Group
As a reminder, the deadline for year-end charitable giving for 2021 is Friday, December 31, while the last day for 2021 grant recommendations from DAFs is Tuesday, December 28.
If you’re considering making a year-end gift but are feeling a bit uncertain about the best avenue for you, please don’t hesitate to reach out and schedule a phone call or meeting. Whether you’d like to learn more about the various options for charitable year-end giving or have an in-depth discussion about the strategy that fits best into your overall financial plan, our door is open.
And, of course, Happy Thanksgiving!