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Your 2021 Guide to Year-End Charitable Giving

November 23, 2021 Author: Tess Downing, MBA, CFP®, Complete View Financial

Complete View Financial San Antonio

Whatever your reason for giving this year, it’s important to know how your charitable contributions can impact your financial plan. In fact, being strategic and intentional in your 2021 contributions can create tax benefits for both you and your chosen charity.

Here’s how.

Research Charitable Organizations

Maximize the impact your monetary donation can have by selecting reputable and transparent organizations. A qualified charity will have 501(c)(3) status, indicating it’s federally recognized as a non-profit organization.

Third-party websites like Charity Navigator, Charity Watch and Give Well offer unbiased, independent ratings and evaluations of charitable organizations. These sites can offer important insights into how money donated is distributed. If you’re considering making a sizeable donation, it may be helpful to speak directly with the chosen charity to discuss how the gift will be utilized.

If you haven’t already, check with your employer about what opportunities they provide in regards to charitable giving. For example, some employers will match employee donations to certain organizations.

Consider Itemizing Your Deductions

To deduct charitable donations, you must itemize them on an IRS Schedule A form. To do this, you’ll need to keep track throughout the year of each donation made to a charitable organization. In most cases, the charity can provide you with a form to document your contribution. If the charity does not have such a form handy (and some do not), you may be able to use other forms of proof including:

  • Receipts
  • Credit or debit card statements
  • Bank statements
  • Canceled checks

When reporting deductions, the IRS may want to know a few important details such as the name of the charity, the gifted amount and the date of your gift.

Remember, itemized deductions may only have tax benefits when they exceed the standard income tax deduction, so be sure to check on the standard deduction amount for your tax filing status.

Make Non-Cash Donations

Many charities welcome non-cash donations. In fact, donating an appreciated asset can be a tax-savvy move.

For example, you may wish to explore a gift of highly appreciated securities. Selling securities can lead to a taxable event. As an alternative, you or a financial professional can write a letter of instruction to a bank or brokerage, which can facilitate authorizing a transfer of shares to a charity.

This transfer can accomplish three things:

  1. Capital gains taxes on the stock are avoided.
  2. You may be able to take a current-year tax deduction for the full fair market value of the shares.
  3. The charity gets the full value of the shares, not their after-tax net value.

Whatever your situation, getting advice from a tax or financial professional can help you give wisely as the year comes to a close. If charitable giving is an important part of your financial plan, it’s important to make sure you’re getting the most value out of each donation.

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