Incorporating philanthropy into your long-term financial planning is not just a noble endeavor; it also presents an opportunity for tax optimization. By crafting and annually revisiting a structured giving plan, you can achieve your philanthropic objectives more effectively while maximizing tax benefits. Here are five strategies I consistently recommend to my clients for more impactful charitable contributions.

1. Gift Appreciated Assets Instead of Cash

While cash donations are straightforward, donating appreciated securities can amplify the value of your contribution and offer significant tax savings. This approach allows you to bypass capital gains taxes and enables the receiving charity to benefit from the full value of the assets.

For instance, consider opting to donate appreciated stock worth $15,000 instead of a cash gift. You’ll avoid paying capital gains tax on the appreciation, still qualify for charitable deductions, and fulfill your donation intentions, potentially at a lower net cost.

2. Consolidate Donations to Leverage Deductions

The temporary deduction introduced by the 2020 CARES Act allows for a straightforward $300 (or $600 for joint filers) deduction without itemization. However, this benefit doesn’t apply for the 2022 tax year onward.

For significant contributions, consider “bundling” donations into a single tax year. This can be effectively managed through a Donor-Advised Fund, allowing you to make a substantial contribution in one year but distribute funds to charities over time.

3. Carry Forward Excess Contributions

You’re allowed to deduct cash contributions up to 60% of your AGI annually. For contributions beyond this limit, the excess can be carried forward for up to five years, providing flexibility in managing your charitable tax deductions.

4. Utilize QCDs at Age 72

Upon reaching age 72, Required Minimum Distributions (RMDs) from retirement accounts become mandatory. A Qualified Charitable Distribution (QCD) allows these RMDs to be donated directly to charity, satisfying your RMD requirement without increasing your taxable income, up to $100,000 annually.

5. Distribute Donations Throughout the Year

Charities need support year-round, not just during the traditional “giving season.” Regular contributions across the year can be more beneficial to charities and easier on your budget. Automating these donations can streamline the process.

Legacy Giving Through Estate Planning

Incorporating charitable bequests in your estate plan can ensure your legacy aligns with your philanthropic values without impacting your current financial security. This approach can also offer estate tax advantages, further enhancing the efficiency of your charitable impact.

By adopting these strategies, not only can you make your philanthropic efforts more meaningful and far-reaching, but you can also optimize the tax benefits associated with charitable giving. Whether you’re just beginning to explore the benefits of structured philanthropy or looking to refine your existing strategy, these approaches can offer a pathway to more effective and satisfying giving.