Studies have found that the adage, “it’s better to give than to receive,” is more than just an old wives’ tale. According to the research, spending money on others or giving to charity puts a bigger smile on your face than buying things for yourself. What would put an even bigger smile on your face? How about a tax benefit for doing a good deed? Now, that’s just smart!
If you are still determining how your finances match up with your upcoming year-end giving strategy, now is the time to learn. Follow the five simple tips below to make the most of your giving this season and enjoy the best time of the year.
Do Your Research
Unfortunately, even in charity, misappropriation of funds and fraud exists. Fraudsters pull at people’s heart strings tricking them into giving to sham charities. Fortunately, though, there are tools available to research charitable organizations. Companies like Charity Navigator, GuideStar, and the Better Business Bureau’s Wise Giving Alliance, provide easy-to-use resources to learn about charitable organizations you are interested in supporting. These sites promise to help ensure that you will intelligently give. In addition to providing detailed information on how each charity runs, they also provide search features, allowing you to look for charities based on locations, types of organizations, and ratings. Taking a few extra minutes to utilize these sources will help ensure your giving provides the most bang for your buck.
Bundle Your Deductions
The 2022 standard deduction is now $12,950 if you are single and $25,900 for married filing jointly. Exceeding the standard deduction has increasingly become difficult for most people, especially without extra planning effort.
As the standard deduction has increased, bundling, or grouping multiple years of your tax deductions into a single year, while taking the standard deduction in interim years has allowed some to make the most of their deductible expenses.
If you are interested in a neat strategy to help you accomplish this, consider a donor-advised fund, which allows you to make a charitable donation, immediately take the tax break, and then recommend grants to qualified charities over time.
Donate Appreciated Stock
Even with this year’s poor market performance, assets you have held for an extended period may still hold long-term capital gains. By properly donating stocks or other appreciated assets, you may avoid capital gains taxes and still deduct the full market value of your charitable contribution. This is especially advantageous for high-income earners who itemize deductions.
Utilize Your IRA
If you are over 70 ½, the IRS offers a tax advantage for qualified charitable distributions (QCD). Gifting money directly from your IRA to a charity is a tax-efficient way of meeting any required minimum distributions (RMD) without any tax consequence. As an extra bonus, you don’t need to itemize deductions to take advantage of the break. You may distribute up to $100,000 per year per taxpayer to charity. Make sure you let the IRS know about your qualifying contribution, as the custodian will not automatically denote your donation.
Time is Money
For those who may be running on a tight budget, or those looking to give something more substantial than a monetary gift, there are dozens of ways to give back to the community that doesn’t include money. Organizations need volunteers for many different positions and usually welcome any assistance they can get.
Although you can’t deduct the value of your time or service, you can deduct expenses related to volunteering if the expenses directly connect to your volunteer work, are not reimbursed, and are not considered personal, living, or family expenses.
The Bottom Line
It doesn’t matter if you donate time or money; giving promotes happiness. A few simple steps could maximize your giving strategies and offer tax relief. A win, win in my book. So as we kick off the year-end festivities, may everyone find the time to give thanks for the blessings in their lives and, most importantly, enjoy happy holidays.
This material is provided as a courtesy and for educational purposes only. Investing involves risk including loss of principal. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. This article contains links to articles or other information that may be contained on a third-party website. River City Wealth Management is not responsible for and does not control, adopt, or endorse any content contained on any third-party website. The information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. Past performance is not indicative of future results.