Three Ways to Donate in a Tax-Efficient Manner
Take advantage of the new cash gift charitable tax deduction. You can deduct $1,000 of cash donations if you are single and $2,000 if you are married. You don't have to itemize your taxes to take advantage of this. It is small, yet simple. Make sure you are taking advantage of it.
Donate appreciated stocks. This is typically done via a Donor Advised Fund(DAF). A DAF allows you to donate stock that has grown in value and take a tax deduction based on the current fair market value. Normally, when you sell an investment for more money than you bought it for, tax is owed on the gain above what you paid for it. However, in this case, you don’t have to sell the stock; therefore, you don’t have a taxable gain to pay. But, as I mentioned earlier, you are able to take a tax deduction based on the current fair market value of the stock. This can be done with things like ETFs; plus, other assets can be used if the DAF accepts them(e.g., real estate, crypto, etc). Consult a tax and financial advisor about this because there are limits on how much you can deduct based on your income and holding period of the asset.
Make a Qualified Charitable Distribution(QCD). If you are older than 70.5 then you can distribute funds directly from your IRA to a charity. If done correctly, the distribution won't count as income. This can be done even if you don't itemize your taxes.
This is not tax or financial advice. If you want to discuss your individual situation to see if any of these can apply to you, please book an introductory meeting here.