Before making an outsized donation to a charitable cause, talk with your CPA or financial planner to determine the best way to go about it. Here’s where to begin.
What’s my filing status after the tax overhaul? If you’re far below the standard deduction of $12,000 (single) or $24,000 (married joint filers), a large charitable gift may not be enough to get you over the threshold to itemize.
Which assets are the best to donate? Cash may be the easiest thing to give, but if you’re holding highly appreciated investments, consider donating those instead.
If you sell your stock and donate the cash, you’ll be on the hook for capital gains taxes when you liquidate. By giving the stock directly to charity, you avoid the capital gains tax hit.
What’s the best way to give? Donor-advised funds have multiple upsides: They can take a variety of investments, and they aren’t required to distribute a certain number of assets each year the way private foundations are.
That doesn’t mean it’s the best way for you to give. For instance, if you want to put your money to work immediately, it might make better sense to give directly to your charity of choice.
“Donor-advised funds are best used for donors who want the tax benefit today, but who don’t want to give the money to charity just yet,” said Steffen.
Talk about your goals with your financial advisor and determine a charitable giving strategy that works for you.
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