Charitable Giving: Making an Impact Efficiently
In the devastating aftermath of Hurricane Helene, our community has shown incredible resilience and a strong desire to help those affected. We've received numerous inquiries from clients and friends asking how they can make a meaningful difference. There are several trusted charities and GoFundMe links circulating in the news and on social media, and we want to say that, first and foremost, you should donate where your heart feels called. In the midst of a crisis, we understand and support the urgent desire to provide help where it is most needed.
But beyond (and even during) crisis response, we also believe that strategic giving can amplify your impact. As charitable giving is a top priority on many of our minds right now, we wanted to write this post to explore how you can support relief efforts and other causes close to your heart, while also being mindful of tax efficiency. By understanding these strategies, you may find you're able to give more effectively and potentially increase your capacity to help over time.
Why Give?
1. It's a reflection of our values: Charitable giving allows us to support causes we believe in and contribute to the world we want to see.
2. It can increase happiness: Research consistently shows that spending money on others or donating to charity leads to greater happiness than spending on ourselves.
3. It teaches important lessons: For those with families, charitable giving can be a powerful tool to teach children about money, generosity, and social responsibility.
4. It can offer tax benefits: While not the primary motivation, the tax advantages of charitable giving can help us give more effectively.
Giving Strategies to Plan For…
It’s important to note that many of these strategies are not going to be directly applicable in a crisis-response situation, but you can always apply them to organizations that provide aid and relief, to help them be better prepared for future disasters. Here are some of our favorite strategies to maximize charitable contribution:
1. Donating Appreciated Assets
As of 2024, many investors have seen significant gains in their portfolios. Donating appreciated stocks or mutual funds held for more than a year can be more tax-efficient than giving cash. Here's why:
- You avoid paying capital gains tax on the appreciation.
- You can deduct the full fair market value of the asset (subject to AGI limitations).
- The charity receives the full value of the asset.
2. Donor-Advised Funds (DAF)
A DAF can be thought of as a charitable investment account. It allows you to:
- Make a tax-deductible donation now.
- Invest the funds for potential growth.
- Recommend grants to charities over time.
This can be particularly useful for "bunching" donations in high-income years or when you have a windfall.
3. Understanding the Tax Implications
For 2024, the standard deduction is $14,600 for singles and $29,200 for married couples filing jointly. If your itemized deductions, including charitable gifts, exceed these amounts, you may benefit from itemizing.
Consider:
- Bunching donations in alternating years to exceed the standard deduction.
- Using a qualified charitable distribution (QCD) from your IRA if you're over 70½ years old.
4. Setting a Giving Goal
Just as we set savings goals, consider setting a giving goal. This could be a percentage of income or a fixed dollar amount. Start small if needed and increase over time as your financial situation allows.
5. Researching and Engaging
Staying informed about the charities you choose to give to is critical. Many people also find fulfillment in engaging beyond their monetary donations.
- Use resources like Charity Navigator or GuideStar to research organizations.
- Consider volunteering or visiting charities you support to deepen your connection.
- Leverage your impact through outreach: invite family members in the giving process to make it a shared value, and spread the word in your broader communities.
6. Maximize your contributions with matching, if available
If your company provides a donation-match benefit (many large tech companies do this), be sure to utilize this benefit annually. This is a fantastic perk that shouldn’t go wasted! If you don’t have this available, you might instead research charities supported by brands, services and businesses that you already buy from. For instance, many businesses are currently running campaigns where they donate a percentage of profits to various disaster relief agencies in Western NC. You can time your purchases during such campaigns to maximize the impact, and you may even consider allocating a portion of your shopping or giving budget for these opportunities.
The Long View…
A mindset that we like to share with our clients is one that approaches charitable giving far beyond the immediate tax year or the current economic climate. For many folks, charitable giving can be a beautiful way to build a legacy of generosity and make a positive impact over time. As you consider your financial plans, think about how charitable giving fits into your broader life goals and the mark you want to leave on the world.
Remember, effective giving is both an art and a science. It requires balancing your financial realities with your deepest values. By approaching charitable giving thoughtfully and strategically, you can maximize your impact while also potentially improving your financial picture.
As you move forward, consider not just how much you can afford to give, but how giving can become an integral part of your financial and personal life. After all, true wealth isn't just about how much you have, but instead what you do with what you have.
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.