As the year comes to a close, many people seek ways to make meaningful charitable contributions while also considering the tax benefits such gifts can provide. The following options and strategies can help you maximize your charitable impact and financial efficiency, particularly as recent updates to IRS rules have expanded opportunities for tax-advantaged giving.

Qualified Charitable Distributions (QCDs) from IRAs

If you are 70½ or older, making a Qualified Charitable Distribution (QCD) from your IRA can be a powerful tool for charitable giving. In 2024, QCDs allow you to donate up to $105,000 directly to a qualified charity, excluding the amount from your taxable income. This strategy is particularly beneficial for those who do not itemize deductions, as it provides a tax advantage without needing to claim a charitable deduction on your tax return. 

For married couples filing jointly, each spouse with an IRA can make their own QCDs, effectively doubling the donation limit to $210,000. For those 73 or older, QCDs can also count toward satisfying your Required Minimum Distribution (RMD), reducing your taxable income further.

When planning a QCD, ensure the funds go directly from your IRA custodian to the charitable organization to qualify for the tax benefit.

Charitable Contributions from Cash or Non-Cash Assets

Cash donations remain the most straightforward method of giving. If you itemize deductions, you can claim a deduction for cash contributions up to 60% of your Adjusted Gross Income (AGI). However, non-cash donations, such as appreciated stocks, real estate, or other assets, can offer additional tax benefits. By donating appreciated assets, you can avoid paying capital gains tax while still deducting the fair market value of the donation, subject to certain AGI limitations.

For donations of $250 or more, remember to obtain a written acknowledgment from the charity that includes the amount of the donation and whether any goods or services were received in return.

Donor-Advised Funds (DAFs)

Donor-Advised Funds (DAFs) provide a flexible way to manage your charitable giving. By contributing to a DAF, you can receive an immediate tax deduction while taking your time to decide which charities to support. This can be especially useful for those expecting a significant taxable event this year or who wish to "bundle" donations into a single tax year to maximize deductions.

DAFs can accept a wide range of assets, including cash, securities, and complex assets, making them versatile for both donors and charitable organizations.

Incorporating Charitable Giving in Estate Planning

End-of-year giving also offers a chance to align your charitable contributions with your estate planning goals.

Key Deadlines and Considerations

• Timing: Contributions must be made by December 31 to count toward the current tax year. For QCDs and other transfers, ensure your financial institution processes the donation by this deadline.
• Eligibility Rules: To ensure your contribution is tax-deductible, verify that the charity is qualified under IRS guidelines. You can confirm a charity's status using the IRS Tax-Exempt Organization Search tool.
• Documentation: Keep detailed records of your contributions, including acknowledgments for gifts of $250 or more, and ensure compliance with IRS requirements.

The end of the year provides an ideal opportunity to reflect on your financial goals and philanthropic priorities. Whether through QCDs, DAFs, or strategic asset donations, these options offer meaningful ways to give back while optimizing your tax position.

Last But Not Least, Leaving Your Legacy

Designating a charity as a beneficiary of your IRA, life insurance policy, or other accounts can create a lasting legacy while reducing the taxable estate. Leaving retirement accounts to a charity can help avoid the double taxation (income and estate tax) that might apply if these accounts are left to individual heirs. And because charities do not pay income tax, the full amount of your donation will directly benefit the charity.

Consulting with financial and legal professionals can confirm your contributions align with both your charitable intentions and financial well-being. At Sundvick Legacy Center, we can help ensure your philanthropic intentions are properly documented within your Estate Plan and you pass on the legacy of your design.

_Sources:

_{https://www.irs.gov/newsroom/give-more-tax-free-eligible-ira-owners-can-donate-up-to-105000-to-charity-in-2024
https://www.fa-mag.com/news/three-estate-planning-to-do-s-before-december-31--2023-75617.html
https://seanjnichols.com/blog/probate/charitable-giving-strategies-estate-planning/
https://smithlegacylaw.com/resources/insights/how-to-include-charitable-giving-in-your-estate-planning/
https://www.psca.org/news/psca-news/2024/11/irs-reminds-ira-owners-of-charitable-donation-rules/}