Smart Giving for 2024
Charitable Giving: Not Just for the Wealthy
As 2024 comes to a close, many individuals, including single high-income professionals, dual-income households, and business owners, face significant tax bills. Strategic charitable giving can offer a meaningful way to reduce taxable income and make a difference. Here’s how to optimize your giving with a focus on tax efficiency.
Amber’s Approach: Bunching Contributions Amber, a single professional, plans to donate $5,000 annually to her favorite charity. However, this amount doesn’t surpass the standard deduction threshold for itemizing. By “bunching” two years of donations into 2024, Amber can exceed the standard deduction, allowing her to claim a larger tax benefit. A donor-advised fund (DAF) can make this strategy even more efficient by spreading her donations to the charity over time.
Robert’s Strategy: Donating Appreciated Stock Robert owns $50,000 in stock that he purchased for $5,000. If he sells it, he’ll face significant capital gains taxes. Instead, Robert donates the stock directly to a DAF, avoiding the capital gains tax and receiving a deduction for the full fair market value. This approach maximizes his giving potential while reducing his tax liability.
The Power of Donor-Advised Funds (DAFs) DAFs simplify charitable giving, especially for appreciated assets like stocks or real estate. Once you contribute, your funds can be invested for tax-free growth or granted to charities of your choice over time. DAFs are an excellent tool for bunching donations or managing complex assets.
Plan Early to Maximize Benefits The deadline for 2024 deductions is December 31, but complex donations like real estate or business interests require more processing time. Start planning now to ensure your contributions are processed on time. Remember to consult a tax professional to ensure your strategy aligns with your financial goals.
Ready to Make the Most of Your Giving? Charitable giving can create meaningful impact and smart tax savings. If you're interested in exploring strategies like DAFs, bunching, or asset donations, let’s discuss how to make these approaches work for you. Together, we can align your generosity with your financial goals.