Charity may begin at home, but it also starts in your bank account. When considering a charitable donation, planning the gift can be just as important as the gift itself. Careful planning will leave you with a greater feeling of gratification, and it will help you maximize your tax breaks. Here, we list tips on putting together a solid charitable giving plan.
Everyone has a cause that has personal meaning, such as cultural or socioeconomic issues. It’s important to stand up for what you believe in, but it’s just as important to ensure that the organizations you choose use your money efficiently. When choosing a charity, select one that uses at least 75% of your donation for services and programs.
If you aren’t careful, you may end up making multiple donations to the same charity, or forget about deductible offerings. When you donate, get a receipt and file it away for tax purposes. For family gifts, monitor what and when you give so you don’t cause them to have to file a “gift tax” return.
Give an Appreciated Asset
Most people automatically reach into their wallet when they want to give, and while cash is easy, it may not always be the best choice. For instance, giving stock to charity allows you to deduct for its value without the capital gains tax that would come from selling and then donating the cash. If you’re giving depreciated assets, such as a vehicle, it’s better to sell it and then donate the cash because you can’t transfer a tax loss to another individual.
Make a Lifelong Plan
Giving shouldn’t be part of a yearly Financial Planning strategy – it should be part of a lifelong plan. You can set aside personal and charitable gifts before you pass on, and in some cases you can eliminate estate tax bills. Designate a person or a charity as a beneficiary of certain accounts, or set up a trust to benefit those interests.
Charitable giving is a rewarding and important part of life. By working with a financial advisor, you can put together a balanced strategy for giving, and an approach that reflects the legacy you want to leave for your family.