Are you thinking about revamping your charitable giving plan for the new year, or considering incorporating charitable giving into your financial plan for the first time?
Our short video breaks down four smart strategies for giving that can help you maximize your impact while taking advantage of potential tax benefits. Whether you’re a high-income earner or just looking to make your donations go further, these tips show you how to give strategically and effectively.
Start transforming the way you share your wealth and make a meaningful impact. Watch the video now to learn how to give smarter and more tax-efficiently.
Transcript:
Start the Year Right With Charitable Giving
Hi, I’m Ben Martinek with Bona Fide Finance. Thanks for taking a few minutes to watch this video.
If you’re like me and want to start the new year off right, you may be considering a New Year’s resolution—perhaps one geared toward charitable giving. Maybe you look over the last year and realize you didn’t give as much as you could have, even though you were in a position to do so. Let’s commit to doing more with the money we have available.
Good on you for wanting to give more. Let’s also try to give money smartly, because doing both just makes sense. I want to give you a few tips you could consider.
Gifting Appreciated Stock to Charity
One option is gifting appreciated stock. What does that mean?
If you have money sitting in a taxable brokerage account—outside of qualified accounts like 401(k)s, 403(b)s, 457s, or IRAs—your investments are growing but subject to taxes when sold. Instead of selling that stock and paying taxes on the gains, you can give the stock directly to charity.
The benefits:
- You don’t incur taxes on the gains.
- The charity doesn’t incur taxes when they sell it.
- You still receive a tax deduction for the full value of the stock.
This is a smart way to give if you have appreciated stock.
Bunching Charitable Contributions
Another smart strategy is bunching your contributions, which only applies if you itemize your deductions. High-income earners often itemize, but it’s important to understand how it works.
Itemized deductions usually include:
- State and local taxes
- Mortgage interest
If these two alone nearly reach the standard deduction (roughly $32,000), additional charitable contributions may not provide extra tax benefit. For example, if you give $5,000 annually, the first $5,000 may not increase your deduction.
Bunching contributions solves this:
- Give one large contribution in January and another in December of the same tax year.
- This allows you to effectively double your tax benefit for charitable giving.
- Repeat this every other year for continued efficiency.
Using a Donor-Advised Fund
A donor-advised fund can also be a strategic way to give. While often oversold, it can be useful in certain situations:
- Large spikes in income, such as selling a business or receiving a substantial bonus
- Wanting to give to charity but not immediately
Here’s how it works:
- Contribute a large amount to the donor-advised fund in a high-income year.
- Receive the full tax deduction in that year.
- Decide over time which charities to fund.
This approach provides flexibility and maximizes your tax benefit while allowing you to plan charitable giving over multiple years.
Schedule a Call for More Guidance
I hope you find these tips compelling. We have even more strategies to share, but I’m running out of time.If we can help, please schedule an introductory call by reaching out at hello@bonafidefinance.com. We look forward to hearing from you.