Taxes and charitable contributions
Giving to charity feels good. Knowing you’ve supported a cause that aligns with your values? Even better. But did you know charitable giving can also be a savvy financial move? It’s true—done strategically, giving not only benefits your favorite nonprofits, it could also benefit your bottom line.
Whether you’re an individual aiming to make the most of your contributions or a business owner looking to maximize impact, understanding the tax benefits of charitable giving can open doors to smarter, more effective philanthropy. I’m not a financial advisor, but I do know how to help you navigate the world of giving with intention. Let’s break it down.
The basics: Tax Deduction 101
First things first—what exactly makes a donation tax-deductible? The IRS has some rules:
Your donation must go to a qualified 501(c)(3) nonprofit organization.
You’ll need to keep records, like receipts or acknowledgment letters, for your contributions. Nonprofits must provide a tax receipt for any single donation of $250 or more. Donations over $75 that are partly a contribution and partly in exchange for goods or services require a special acknowledgment detailing the deductible portion. Please note there other considerations may factor in so check with your financial advisor on what else you might need.
Eligible donations aren’t just limited to cash. You can also deduct gifts of:
Stocks or securities
Real estate or other assets
Goods or services
Pro tip: Not every donation is deductible, so double-check the fine print—or better yet, loop in your tax professional.
Maximizing deductions through strategic giving
If you’re serious about making your giving count, it’s time to get strategic. Here are a few smart approaches:
Donor-Advised Funds (DAFs): Think of these as your personal charitable savings account. You contribute to the fund, receive an immediate tax deduction, and recommend grants to nonprofits over time. DAFs are an excellent way to align giving with your financial goals.
Planned giving: Strategies like bequests or charitable trusts allow you to create a lasting legacy while reaping tax benefits now or later.
When giving is planned and purposeful, it’s a win-win. Nonprofits gain steady support, and you may receive tax benefit.
Charitable IRA Contributions: A Hidden Gem
If you’re over 70½ and have an IRA, you have access to a particularly powerful tool - Qualified Charitable Distributions (QCDs). Here’s how it works:
You can transfer up to $105,000 directly from your IRA to a qualified charity.
If you're 73 or older, this contribution counts toward your Required Minimum Distribution (RMD) but isn’t taxed as income.
Translation: You can give generously and cut down your taxable income at the same time. There are additional considerations and you need to consider whether it makes sense for your situation.
Planning for the future
Charitable giving isn’t just about today; it’s about building a lasting impact. Long-term giving strategies, like establishing a family foundation or setting up an endowment ensure continued support for the causes you care about. Legacy planning doesn’t just benefit future generations—it can help you create the kind of change you want to see in the world.
Conclusion: Strategic giving = maximum impact
Whether you’re donating to causes close to your heart or exploring creative ways to make a lasting impact, thoughtful philanthropy can amplify your giving power and possibly provide tax deduction benefits.
I’m here to simplify the process, cut through the overwhelm, and help you create a giving strategy that works for you. If you’re ready to make the most of your charitable contributions, let’s chat.
This blog is for informational purposes only and should not be considered financial or legal advice. Please consult with a financial advisor or tax professional for guidance tailored to your unique situation.