Charitable giving<\/em> is an altruistic opportunity to help others and receive a tax deduction. Here\u2019s how you can maximize both impacts. <\/em><\/p>\n\n\n\n You can approach charitable giving in many ways. Perhaps it\u2019s a monthly obligation, one of your regular budget categories<\/a>, or an annual tradition. No matter when you give, a strategic approach can help ensure your money will be put to good use, and you\u2019ll receive as large of a tax deduction as possible. <\/p>\n\n\n\n Before jumping into strategy, it\u2019s important to understand when and which donations could be tax-deductible. Even if you\u2019ve learned the basics before, it\u2019s worth brushing up on the rules. The 2018 Tax Cuts and Jobs Act also made a few significant changes<\/a> that could continue to impact your plans. <\/p>\n\n\n\n First, know that charitable contributions are itemized deductions and you won\u2019t receive a tax benefit unless the sum of your itemized deductions is greater than your standard deduction. <\/p>\n\n\n\n There are limits on certain types of itemized deductions, such as a $10,000 cap on the combined deduction from state, local, and property taxes. Other deductions, such as the one for unreimbursed work expenses, were completely eliminated in 2018. <\/p>\n\n\n\n The standard deduction also increased. For the 2019 tax year, it\u2019s:<\/p>\n\n\n\n If you or your spouse are 65 or older, your standard deduction increases by $1,300. If you both qualify, it increases by $2,600. If you\u2019re 65 or older and unmarried, you may receive an additional $1,650. <\/p>\n\n\n\n There are a few more rules to keep in mind:<\/p>\n\n\n\n With these basics in mind, here are four strategies you can use to maximize the impact of your charitable giving:<\/p>\n\n\n\n You may have several charities you know well and want to continue supporting, and there may be a few causes that are particularly meaningful to you. <\/p>\n\n\n\n If you\u2019re looking to make as big of an impact as possible, research the charities before giving to make sure they\u2019re using their money wisely. You may find that the big-name nonprofits aren\u2019t necessarily the most effective change-makers.<\/p>\n\n\n\n Charity Navigator<\/a>, Charity Watch<\/a>, and the BBB Wise Giving Alliance<\/a> can help you do your due diligence and provide easy-to-understand ratings of nonprofits. You can search by specific charity, or look through different keywords and topic areas to discover lesser-known organizations that could use your help. <\/p>\n\n\n\n Donating long-term appreciated assets (meaning you\u2019ve held the investment for at least a year) can be an especially efficient way to support a good cause. These can include stocks, bonds, mutual funds, and other types of investment products. <\/p>\n\n\n\n It\u2019s a good strategy because you can deduct the investment\u2019s current value, but you don\u2019t need to sell it first and therefore avoid paying taxes on your gains. Additionally, the charity won\u2019t pay taxes on the investment\u2019s gains\u2014making this an easy win-win. <\/p>\n\n\n\n Similarly, if you\u2019ve started taking required minimum distributions, you could make qualified charitable distributions<\/a> (QCDs) from your account instead. The QCD isn\u2019t tax-deductible, but there\u2019s still a benefit because you won\u2019t have to pay income or capital gains taxes on the distribution. <\/p>\n\n\n\n With the changes to itemized and standard deductions, you may find that your charitable contributions don\u2019t offer as big of a tax deduction as they once did. The bunching strategy\u2014making several years\u2019 worth of contributions at once\u2014could help. <\/p>\n\n\n\n For example, if you\u2019re married and file jointly (and both under 65 years old), your standard deduction will be $24,400 for the 2019 tax year. If you have $22,000 in itemized deductions, including $10,000 in charitable donations, there\u2019s no tax benefit to giving this year. Even if you give more, you\u2019ll only see a marginal benefit as you push past the $24,400 standard deduction line.<\/p>\n\n\n\n However, you could take the standard deduction this year and make the $10,000 donations at the start of next year. Bunch this with your 2020 donations, and you\u2019ll have $20,000 in tax-deductible charitable donations next year. Add the additional $12,000 from your other itemized deductions, and you\u2019ll now be at $32,000, which is much higher than the standard deduction. <\/p>\n\n\n\nThe Tax Deduction Basics<\/h3>\n\n\n\n
1. Research Charitable Organizations Before Giving<\/h3>\n\n\n\n
2. Gift Appreciated Assets Instead of Cash<\/h3>\n\n\n\n
3. Bunch Your Donations<\/h3>\n\n\n\n
4. Start a Donor-Advised Fund<\/h3>\n\n\n\n