Before You Write That Check to Charity
The same charitable gift can produce very different tax outcomes depending on what you give and when you give it. Cash has become the default for most charitable giving, but it isn't always the best asset to donate. Appreciated stocks, ETFs, or mutual funds can often be given directly to charity, potentially allowing you to avoid capital-gains taxes while still receiving a charitable deduction if you qualify. For people who give regularly, a donor-advised fund can make it easier to bunch several years of charitable deductions into a single tax year while distributing the money to charities over time.
After age 70½, qualified charitable distributions from an IRA create another opportunity by allowing money to go directly from an IRA to charity without first being included in taxable income. Estate planning matters too: sometimes the assets that are best to give during your lifetime are very different from the assets that are best left to charity at death.
Before automatically donating cash, ask a few questions: Do I own appreciated investments? Would a donor-advised fund help? Am I eligible to give directly from my IRA? And am I planning to leave money to charity at death? The right answer depends on your circumstances, but choosing the right asset can make your giving significantly more tax-efficient. If you're not sure where to start, try our Charitable Giving Strategy Finder to see which strategies may be worth exploring.
