Quick Tips for Your Charitable Giving Strategy

Philanthropy is an important aspect in many people’s lives because there’s no better feeling than knowing you’re doing your part to help a great cause, and to help improve the lives of those less fortunate than you. And, giving your hard-earned retirement dollars to charity can be a highly tax-efficient use of your savings. But, before you choose where and how you’re giving, here are a couple quick tips to consider for your charitable giving strategy.

Stress test your portfolio’s longevity before making financial gifts to charity.  It’s important to make sure your nest egg is secure and has the ability to last throughout a very long retirement before deciding how much to give to charity. If there’s a possibility of falling short, a better option would be to defer charitable lifetime gifts and instead weave charitable giving into your estate plan and wills.

Check up on the charity’s effectiveness.  Even though it’s a great feeling to make a financial contribution to a charity you have a personal or emotional connection with, be sure to know what percentage of their revenues go to actual programming and how much goes to administrative and fundraising expenses. A creditable resource, www.charitynavigator.org rates charities on their efficiency, and downgrades charities that are not spending at least two thirds of their budgets on actual programming.

Understand the rules about deductibility.  Gifts to most public charities will be tax-deductible. However, contributions to certain organizations like political groups and foreign charities may not be. To reap the tax benefits, make sure that your charity is a 501(c)3 corporation, and not a 501(c)4. You can use the IRS database to double-check the status of the charity: https://www.irs.gov/charities-non-profits/exempt-organizations-select-check. Most contributions to public charities are fully deductible as long as your contribution doesn’t exceed 50% of your adjusted gross income. It’s important to note that some charities may offer gifts in exchange for your donations. However, these gifts can reduce the amount you can claim on your taxes based on their value, so be extra careful before accepting without understanding the impact on deductibility.

Consider using RMDs for charitable contributions.  If you don’t need the money and you take RMDs from your IRA, you can put up to $100K from your RMD directly into a charity. This is known as a Qualified Charitable Distribution or QCD. This is beneficial because you won’t owe taxes on the amount of the RMD you contributed to charity.

Consider naming a charity as an IRA beneficiary.  Make a charity the beneficiary of your IRA if you want to make charitable giving part of your estate plan. The charity will receive the assets tax-free and your estate will also be eligible for a charitable deduction. If you plan on giving part of your estate to charity, the rest of your beneficiaries are probably better off inheriting non-IRA assets and letting the charity benefit from the IRA.

Ultimately, charitable giving is just one way that you can help minimize your tax burden while still doing good for your community. To learn more about implementing charitable giving strategies, CLICK HERE to request your complimentary, no obligation review. We’ll work with you to best understand your goals, and help devise a comprehensive retirement plan that incorporates charitable giving strategies so you can make a positive difference in the world!