If you’re clear about the impact you want to make through your contributions, philanthropy should be highly satisfying for both you and the charity you support. Being aware of your philanthropic goals and planning ahead of time will assist you in making informed decisions and achieving the impact you desire with your charity.
You can lock in tax benefits and save money for your successors by donating to charity. Consider the following charitable giving tax techniques to reduce your current and future tax burden while supporting a good cause or helping your town.
Get Clear on Your Charitable Objectives
Consider what’s most important to you and how far you want to reach. Do you want your contributions to have a local or global impact? Do you wish to support specific groups, such as your child’s school, or broad issues, such as education? Your charitable priorities are likely to shift over time. Even if you only revisit your goals once a year, writing them down will help you make better decisions.
When determining your goals and objectives, keep the following in mind:
Why do I want to give?
Understanding your reasons allows you to focus more on your giving and guarantees that it is fruitful. The most successful philanthropists give out of a genuine desire to act on their outrage over a lack of progress or provision in any one specific area.
What are your beliefs, values, and passions?
Knowing your values and beliefs might help you focus your donating on essential things to you. You might want to consider crafting a brief mission statement that expresses both your personal values and views.
What causes do I care about?
Consider what matters most to you and why. Is there a cause that has had a significant impact on your life? Do you wish to help reasons that aren’t as well-known? Do you have a solid connection to a particular cause, such as animals, mental health, or childhood education? Making a list of the issues you wish to support – and why – might help you focus.
Set Boundaries For What You are Willing to Give
Having a philanthropic budget allows you to decline funding requests that align with your top goals. Set boundaries for yourself to help you stay on track with your plan. Consider how much a meaningful gift to each of your favorite charities would cost, and leave room for additional giving options. Consider how much time you have to offer; this may influence how much research you’re willing to do or if you can volunteer.
Develop a Strategy
Consider whether other philanthropic vehicles would better suit your giving needs before mailing a cheque or hitting send on an online gift. A donor-advised fund (DAF) is a popular vehicle that works similarly to a charitable checking account, allowing you to earn a tax credit upfront while also making gifts to any qualified charity over time.
After you’ve established your goals and objectives, you’ll need to turn them into a workable plan or giving strategy. This will be determined by whether you want to address the core reasons or relieve the symptoms, the resources you have at your disposal, and your knowledge and experience of what works best.
Depending on your plan, you may want to give a one-time donation, staggered money over several years (multi-year funding), or continuing assistance through social investing.
Non-financial assets, such as volunteering, making introductions between the charity and influencers in your social or business network, or opening up data and intellectual property (IP) that you may have access to, may also be considered investments in your chosen organizations.
Donate highly appreciated assets
You will owe capital gains tax if you sell assets that have increased significantly in value over time, such as securities or real estate. One approach to avoid capital gains taxes is to donate these assets to a qualifying nonprofit organization. Simultaneously, you can lock in an income tax deduction for the asset’s fair market value. The charity that receives your gift will not have to pay capital gains tax and benefit from your gift’s fair market value.
Choose Your Charities
The sheer number of organizations available might easily make one feel overwhelmed. It’s equally easier to become paralyzed by the enormity of the issue that some of those charities, as well as society as a whole, are up against. On the other hand, research can help you locate the ideal partner to maximize your funds, bring your plan to life, and achieve your goals and objectives.
While these charity-giving tax methods offer advantages, it may be challenging to determine the ideal time to use them or decide which strategies work best in your situation. Working with competent financial, tax, and estate planning professionals can assist you in developing the best-giving strategy to meet your philanthropic goals and save money on taxes now and in the future.
If you need help with your charitable giving strategy, feel free to contact us.