By Michael Stanton, CFP®
Charitable giving offers you a chance to help yourself while helping others. You can support the qualified charities you love while also lowering your tax burden. However, if you’re interested in maximizing charitable giving strategies, it’s smart to build a detailed plan before you give.
At Thrive Wealth Management, I’ve helped many clients create personalized charitable giving strategies designed to improve efficiency. These are some of the strategies I most commonly recommend:
Itemizing Deductions
This is one of the simpler methods of maximizing charitable giving strategies. If you already itemize deductions on your tax return or you’re thinking about doing so, you might consider itemizing your donations to qualifying 501(c)(3) charities. Before a client makes a donation, I’m happy to help them verify that their chosen charity is eligible.
If you’re considering doing this, remember that timing matters. To itemize a donation on your tax return, you must make your donation by December 31.
Donating Appreciated Assets
If you’re interested in maximizing charitable giving strategies while also avoiding paying capital gains taxes, you might consider donating appreciated assets. You aren’t limited to cash donations when you’re supporting a charity. You can also contribute appreciated stocks, ETFs, mutual funds, and other investments.
This strategy offers the best of both worlds: although you eliminate capital gains taxes, you can deduct the full fair market value of the asset. You aren’t passing on a tax burden to your chosen charity either; the charity receives the full value of the donation.
Qualified Charitable Distributions (QCDs)
If you have a traditional IRA, a 401(k), or other retirement plan funded with pre-tax dollars, you must start taking required minimum distributions (RMDs) once you turn 70½. (1) RMDs are taxed as ordinary income, so if you have a well-funded retirement account, you could be looking at a hefty tax bill.
Qualified charitable distributions, or QCDs, are one of the most effective ways of maximizing charitable giving strategies if you have a traditional IRA and are 70½ or older. You can send up to $108,000 per year to qualified charities.
This method of maximizing charitable giving strategies has two key benefits for you:
- A donation can satisfy some or all of your RMD for the year.
- The amount you donate is excluded from your taxable income.
To make a QCD, you must direct the administrator of your IRA to donate a specific sum to a specific charity; you can’t receive the funds yourself first.
Bunching Contributions
If your itemized deductions are very close to the standard deduction threshold, “bunching” your donations may be wise. Maximizing charitable giving strategies through bunching involves making multiple years’ worth of charitable donations in a single year.
In the bunched year, you can itemize your tax deductions and enjoy significant tax benefits. In the years before and after, you can take the standard deduction.
For clients who want to use this method, I often suggest creating a donor-advised fund (DAF). With a DAF, you make an irrevocable contribution to fund the account and receive an immediate tax deduction. However, grants are sent from the fund to different charities over time and you can play a part in determining the various charity recipients.
Ready to Start Maximizing Charitable Giving Strategies?
For many of my clients at Thrive Wealth Management, LLC, philanthropy is an important part of their wealth management strategy. I help these clients with charitable giving strategies for tax efficiency and building a comprehensive tax plan.
If you’re ready to talk about maximizing charitable giving strategies, contact us to set up a consultation. To schedule a meeting, call (215) 376-5530 or email mstanton@thrivewealth.com.
About Michael
Michael Stanton, CFP®, is a Financial Planner at Thrive Wealth Management, LLC, a boutique financial planning firm in Blue Bell, Pennsylvania. With experience since 2012 helping individuals and families pursue their financial goals with confidence, Michael builds lasting relationships with his clients. He offers more than just financial advice; he provides genuine care, responsiveness, and transparency. His approach is centered on coordinating every aspect of a client’s financial life, ensuring they feel supported and confident in their plan. Michael’s most fulfilling moments come from helping clients realize their dreams, whether it’s saving for college, retiring comfortably, or navigating life’s challenges. He also acts as the quarterback, working alongside clients’ CPAs, attorneys, and other professionals to keep their financial lives aligned.
Prior to joining the Thrive team, Michael worked at Prudential Financial and Lincoln Investment Planning, Inc., gaining expertise in retirement planning. He holds a BS in Business Management & Finance from the University of Scranton, the CERTIFIED FINANCIAL PLANNER® designation, and is the founder of Stand-By-Steve, a nonprofit providing scholarships. Outside of work, he enjoys golfing, playing guitar with his band, and spending time with his wife, daughter, and son. To learn more about Michael, connect with him on LinkedIn.
Disclosure:
This material is provided for informational and educational purposes only, should not be viewed as an exhaustive discussion of the topics presented, and should not be construed as individualized advice for any reader’s personal circumstances. For guidance on how these matters may impact your tax circumstances, charitable giving plans, financial plan, or investment portfolio, please contact your Thrive Wealth Management, LLC representative. While the information presented is believed to be factual and up to date, Thrive Wealth Management, LLC does not guarantee its accuracy and, due to various factors, including but not limited to changing laws and regulations, this information is subject to change. All expressions of opinion reflect the judgment of the authors as of the date of publication. Thrive Wealth Management, LLC is not a law firm or an accounting firm, and no content contained herein should be construed as legal or accounting advice. Please consult with the qualified professional(s) of your choosing for legal and accounting advice.
Please visit https://thrivewealth.com/disclosure for additional information regarding the professional designations and credentials discussed. Professional designations and credentials do not guarantee success or any particular investment or financial outcome.
Past performance does not guarantee future results. All investing comes with risk, including risk of loss.
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(1) For persons born in 1951–1959, the RMD age is 73; for persons born in 1960 or later, the RMD age will be 75, beginning in 2033.
