Sharing your money and assets with others is a way you can give from the heart and help support the people and causes that mean the most to you. Charitable giving also opens up the potential to receive tax benefits based on when and how you give.
Ben Boline, a senior gift planner at
Donor-advised funds have become a popular giving tool. How do they work?
When you open a
The objective of a DAF is to provide one place for your charitable giving dollars, so, ideally, you have a pool of funds to draw from consistently. You then can give to your favorite charities as you wish, and help minimize worry about dips in your giving since you’ve already allocated the dollars.
DAFs can be especially helpful to donors with variable incomes, like real estate agents or the self-employed. Thanks to the DAF, they still can give consistently year to year since they already have money in the fund to draw from, even when their income changes.
How can donor-advised funds work as a tax-efficiency tool?
If you’re facing a higher tax bill, you can open a DAF now and make contributions to help reduce that bill in the year you make the contribution. Your contribution is then invested (most likely tax-free) and remains in the DAF account until you choose to make a donation to a qualified charity or until your passing, at which point the fund is either passed on to future generations or is distributed to charities you have designated.
What’s more, a DAF can help you avoid tax-time paperwork headaches: Instead of tracking down a bunch of donation receipts, your entire giving record is in one place.
Can you give anonymously with donor-advised funds?
Yes, you can use donor-advised funds to give anonymously to charities. Perhaps you want to give to a disaster relief effort but don't want to be an ongoing donor. This way, you still can give generously during the crisis but without visibility.
How has the SECURE Act’s standard deduction increase impacted charitable giving?
However, because the
You can work around this by bundling two or three years of donations. Instead of giving $12,000 to your church in 2024 and $12,000 in 2025, you can contribute $24,000 to your DAF this year. That amount plus this year's total deductions puts you over the standard deduction threshold for the 2023 tax year. For the next two years, you simply can take the standard deduction while donating to your church as always from your donor-advised fund.
How can Qualified Charitable Distributions help retirees cope with SECURE Act 2.0 provisions?
Under the original Secure Act, people with traditional retirement plans such as 401(k)s, 403(b)s or traditional IRAs were to take
- 1950 or earlier: If you turned 72 in 2022 or earlier, there is no change to the RMD start age—it remains 72
- Between 1951 and 1959: If you reach age 73 before 2033, the age for starting RMD is age 73.
- 1960 or later: If you reach age 74 after 2032, your RMD start age is 75.
Taking an RMD also may mean higher Medicare premiums and
SECURE Act 2.0 provisions implement this being indexed for inflation beginning in 2024 ($105,000 annual limit in 2024). A one-time gift of $50,000 applies for QCDs to split-interest entities such as
Here's an example: Say your adjusted gross income (AGI) is $80,000. If you take a $10,000 distribution from your individual retirement account (IRA) and have it sent directly to a charity, your AGI remains $80,000. You don't even need to itemize to get that benefit. However, if you took that RMD and then wrote a check to your favorite charity for $10,000, your AGI would rise to $90,000. Unless you were able to itemize, you wouldn't be able to take that $10,000 deduction.
A QCD also can be useful if you've inherited an IRA as a non-spouse,
How can you help protect your charitable plan from anticipated tax increases now & in the future?
A charitable gift annuity also can help in diversifying assets. Say you have $100,000 of your employer’s company stock, and you’re anticipating retiring and cashing in some or all of it. You can contribute part of your low-cost-basis stock to your charitable gift annuity. You’ll potentially get a tax deduction today and a fixed income stream in retirement. What’s left upon your passing goes into your DAF, supporting your designated charities.
Testamentary Charitable Remainder Trusts: How can you gift your IRAs to family & charities?
With the passage of the SECURE Act, most non-spouse beneficiaries of an IRA must empty that inherited IRA within 10 years. A
Once the payment term ends, one or more charities you’ve designated will receive its assets. With a TCRT, your heirs could avoid having to immediately recognize their inheritance as taxable income, and you leave money to your charities of choice. Everyone can benefit.
The SECURE Act 2.0 provided a one-time exclusion for taxpayers who are at least age 70½ and must take distributions. It allows them to make a one-time $50,000 distribution from an IRA (or IRAs) to a charitable remainder trust and treat the contribution(s) as if it were a qualified charitable distribution made directly to a charity.
How can a financial advisor help support tax-efficient charitable giving?
Financial advisors are at the forefront of helping you make charitable giving a core element of your financial plan. When you work closely with a financial advisor, you’re on the way to gaining a greater sense of gratitude for what you’ve earned and more clarity than ever about how to help give generously to your family, community and society.
Don’t have a financial advisor?