Smart Year-End Charitable Giving Strategies

Family & Estate

December 2, 2020

3:27 min

Pair of hands holding out cardboard that says "give"

Give a charitable gift this holiday season and receive a tax benefit in return.

As the holiday season arrives, remember that people now more than ever need your help. Combine your desire to donate to a worthy cause and save on your taxes by giving charitable donations.

Generally, making charitable contributions can lower your tax bill. High‐income earners, who generally pay tax at higher rates, may receive large tax benefits from charitable donations. [1] Donate to the cause you believe in this holiday season! Here are a few ways you can give charitable donations.

Give appreciated assets as opposed to giving cash

Cash and check donations are the most common methods of charitable giving. However, stocks, bonds and mutual funds, which all appreciate over time, can also be given as a charitable donation. You can also consider donating publicly traded securities. When the donation is made, the donor can claim the fair market value as a deduction on their federal income tax return. It really is a win-win!

Consider a bunching strategy from year to year

You may be familiar with itemizing your deductions, but you can actually switch to another strategy called “bunching.” In this strategy, deductions are concentrated in a single year, then skipped for one or two years. This strategy works well when total itemized deductions for a single year fall below the standard deduction. In order to use this strategy, you must have the financial ability to report all deductions in one year.

Use a charitable donation to offset the tax costs of converting a traditional IRA to a Roth IRA

One way to potentially reduce future taxes is to convert a portion of your traditional IRA assets into Roth IRAs. To help offset the tax cost of a Roth IRA conversion, consider making a charitable contribution!

Life Insurance can be an excellent tool for charitable giving

Life insurance is a great tool for charitable giving. It allows you to make a larger gift than what you can currently afford. Since life insurance proceeds paid to a charity are not subject to income and estate taxes, probate costs, and other expenses, the charity can count on receiving 100 percent of your donation. Then, you can take an income tax deduction equal to your basis in the policy or its fair market value, and deduct the premiums you pay for the policy on your annual tax return. [2]

Over 72? Consider a qualified charitable distribution (QCD) from an IRA

A qualified charitable distribution can satisfy charitable goals and allows funds to be withdrawn from an IRA without any tax consequences. This donation is appealing because you can use it to satisfy your required minimum distribution (RMD). Also, QCD it is not counted against the charitable limits and does not require itemization.

Making a last-minute donation

If you’d like your donation to count for this year’s tax purposes, act by December 31 by charging a credit card or mailing a check. Although the card will not be paid for until the next year and the charity won’t receive the check before the year is over, they will still be deductible for the current year. [3]

Need more information about charitable deductions? We’re here to help! Visit your local Central Bank branch or contact us to learn more.


[1]. Year-end Strategies for Charitable Giving, Fidelity

[2]. Life Insurance and Charitable Giving, Central Investment Advisors

[3]. 5 Things to Know About Year-End Charitable Giving, J.K. Lasser

This material is intended for informational purposes only, and should only be relied up when coordinated with individual professional advice, as individual situations will vary. Neither LPL Financial, nor its registered representatives, offer tax or legal advice. Federal tax laws are complex and subject to change. As with all matters of tax or legal nature, you should consult with your tax or legal counsel for advice.
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its subsidiaries and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.

Category: Family & Estate

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