With the holidays approaching, many are thinking about charitable giving and what non-profit organizations to make a monetary contribution to. This year especially, the decision can feel a bit more complicated as increased inflation and interest rates have significantly impacted cash flow. Despite these conditions, many organizations are seeing an increase in donations, up 10% or more from last year.
Our team has compiled a list of items to consider when choosing which charitable organizations are the best fit for you and your financial plan.
Research the Organization
- Before determining the non-profit organization, you may want to do some homework. Consider if the organization’s values align with yours and that they use the donation in ways you agree with. Websites like GuideStar.org or CharityNavigator.com can help provide pertinent information related to your decision-making process.
Tax Impacts of Charitable Giving
- Depending on the organization’s tax-exempt status, some nonprofits may not qualify for charitable tax deductions. The IRS tax-exempt organization search tool can help determine an organization’s tax-exempt status.
- If you are retired, it may be possible to utilize charitable contributions from IRA distributions to offset the income tax owed on the distribution.
- Consult with a tax professional to determine the tax implications of charitable contributions.
Estate Planning and Your Donation
Maximizing the value of your giving will depend on several factors, such as the size of your estate and the amount and type of assets you want to give. Some clients leverage vehicles such as life insurance policies by naming specific beneficiaries, while others write a check.
- Charity can also be thought of as a gifting strategy to children, grandchildren, and other loved ones. With the gift tax of $17,000 in 2023, there is an opportunity for people to spread assets without having to pay a gift tax. This can help give kids a head start without increasing their income taxes.
- For businesses, 2022 deduction limits for gifts to public charities, including donor-advised funds, are 30% of adjusted gross income (AGI) for contributions of non-cash assets, if the assets were held more than one year, and 60% of AGI for contributions of cash.
- While giving 30% and 60% don’t seem like much of a deduction, there are certain ways that retirees can fulfill their philanthropic desires while capitalizing on these deductions and other charitable contributions.
Please contact us if you have questions on this topic or other financial-related topics.
The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Please consult your certified financial advisor.