Charitable giving can be both meaningful and tax-efficient when done thoughtfully. While many people default to giving cash, there are several strategies that may better align generosity with financial planning goals—especially at year-end. Below are five approaches to consider.
1. Donate Appreciated Securities
Giving long-term appreciated stocks, mutual funds, or bonds directly to a qualified charity can be more tax-efficient than donating cash. Donors may avoid capital gains taxes while receiving a charitable deduction for the full market value of the asset.
2. Make a Qualified Charitable Distribution (QCD)
Individuals age 70½ or older may direct all or part of their IRA required minimum distribution (RMD) straight to a qualified charity. When done correctly, the distribution satisfies the RMD requirement without increasing adjusted gross income.
3. Offset Roth IRA Conversion Taxes
Converting a traditional IRA to a Roth IRA can trigger income taxes. Making charitable contributions in the same year may help offset those taxes, potentially making a conversion more manageable from a tax standpoint.
4. Use a Donor-Advised Fund (DAF)
A donor-advised fund allows donors to take an immediate tax deduction while deciding later which charities to support. DAFs can be particularly useful in high-income years, such as those involving bonuses or business windfalls.
5. Establish a Charitable Remainder Trust (CRT)
A charitable remainder trust allows donors to convert assets into an income stream for life or a set period, with the remaining assets ultimately benefiting a charity. CRTs may offer income, capital gains, and estate tax advantages, depending on the structure.
Final Thoughts
Charitable giving doesn’t have to be limited to writing a check. With thoughtful planning, donors can support causes they care about while potentially improving their overall tax efficiency. A financial professional can help evaluate which strategies best fit an individual’s goals and circumstances.
Registered Principal and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. General Agent of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License Number - 0B98963. | Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. | 8676853.1 Exp. 12/27