Smart Charitable Giving Before December 31st
In this episode of the A Wiser Retirement® Podcast, Shawna Theriault, CFP®, CPA, CDFA®, and William Medcalf, CFP® discuss how year-end is the perfect time to be strategic with charitable giving. They explore smarter ways to give, instead of just writing a check, to reduce your tax burden.
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Summary:
Although the official IRS deadline is December 31, many custodians have earlier cutoff dates. At Wiser, we recommend getting requests in between mid-November and December 1 to avoid last-minute issues. Planning ahead ensures contributions count toward this year’s taxes.
Beyond Cash: Smarter Ways to Give
Most people default to giving cash, but that isn’t always the most tax-efficient choice. Instead, consider strategies such as:
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Donor-Advised Funds (DAFs): Contribute cash or appreciated securities, take the deduction now, and distribute gifts to charities later.
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Qualified Charitable Distributions (QCDs): For those age 70½ or older, you can give directly from your IRA to charity, satisfying part or all of your Required Minimum Distribution (RMD) while avoiding taxable income.
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Appreciated Securities: Instead of selling investments and donating cash, give securities directly. This avoids capital gains and may provide a larger tax benefit.
The “IRA Time Bomb” and Why QCDs Matter
RMDs can create significant taxable income in retirement, the so-called “IRA Time Bomb.” By using QCDs, you can reduce taxable income, lower your adjusted gross income, and potentially minimize impacts on Medicare premiums and other income-based calculations.
Other Giving Strategies
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Bunching Contributions: Combine multiple years’ worth of giving into one tax year to exceed the standard deduction and maximize tax savings.
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Charitable Trusts & Private Foundations: For larger estates or those with long-term charitable goals, trusts or foundations can create ongoing family legacies.
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Employer Matching: Don’t overlook workplace giving programs that can double your impact.
Practical Tips for Success
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Keep receipts and documentation for every contribution.
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Postmark mailed checks by December 31 to qualify for the current tax year.
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Consult with your financial advisor and CPA to ensure strategies align with your overall plan.
Charitable giving is about more than just tax savings, it’s about impact. By being strategic, you can support the causes you care about while strengthening your financial future.
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