Year-End Giving
Year-End Giving
As the year comes to a close, it’s time to embrace the spirit of generosity and make a meaningful impact through end-of-year giving.
What is End-of-Year Giving?
End-of-year giving, also referred to as end-of-the-year giving, is the act of making charitable donations or contributions to nonprofit organizations, charities, or churches during the final months of the calendar year.
It is a period when individuals, families, and businesses reflect on their blessings and determine to give back to causes they care about deeply.
End-of-Year Considerations
As the year draws to a close, many individuals seek to make a positive impact through charitable donations to churches and nonprofits.
It’s essential to approach the year-end giving season with financial wisdom.
When thinking about your financial situation, consider all of your assets, including unrealized capital gains.
For example, your income from investments may have gone down, but the value of your home may have doubled.
Consider making a gift not only from current income, but from unrealized growth on all assets.
This article explores the most financially wise ways to make an end-of-year donation, enabling you to maximize your support while optimizing your personal financial situation.
- Evaluate Your Financial Situation
Before making an end-of-year donation, take a moment to evaluate your overall financial situation. Consider your income, your expenses, and any potential tax benefits associated with charitable giving.
It’s also a great time to meet with your financial or tax advisor to plan and think through charitable giving goals and the impact giving will have on your taxes.
Understanding your financial position will help you determine a donation amount that aligns with your budget and philanthropic goals.
- Research & Choose Reputable Organizations
To ensure that your donation makes a meaningful impact, research and select reputable churches or nonprofits, like Grace Church.
Choose an organization or church that operates with financial transparency and integrity.
- Verify Tax-Exempt Status
To claim tax benefits for your end-of-year donation, confirm that the church or nonprofit you choose has tax-exempt status. This information can usually be found on their website or by contacting the organization directly. Grace Church is tax exempt.
Donations to tax-exempt organizations are generally eligible for tax deductions, allowing you to reduce your taxable income for the year.
- Make a Gift of an IRA Qualified Charitable Distribution (QDC)
One of the primary benefits of an IRA QCD — for individuals who are 70½ years of age or older — is the potential tax advantages it offers.
With an IRA QCD, individuals can donate a portion of their IRA directly to a qualified charity without incurring taxes on the distributed amount.
This distribution is excluded from the donor’s taxable income, which can result in a lower overall tax liability.
For individuals who are subject to Required Minimum Distributions (RMDs) from their IRAs, an IRA QCD can fulfill these distribution requirements.
- Consider Bunching Donations to Increase Tax Benefit
Bunching charitable contributions is a strategy that has gained popularity in recent years, particularly as it relates to end-of-year giving. This approach involves consolidating several years’ worth of charitable donations into a single year, maximizing the potential tax benefits for donors.
Bunching allows donors to surpass the standard deduction threshold, which can significantly enhance their tax deductions. This can result in a larger tax deduction and potentially lower tax liability, allowing donors to retain more of their hard-earned money.
For cash donations, you can deduct up to 60% of your adjusted gross income (AGI). For donations of appreciated assets, such as stocks or real estate, you can deduct up to 30% of your AGI.
- Consider Donating Appreciated Assets
If you own appreciated assets, such as stocks, bonds, or mutual funds, donating them directly to a church or nonprofit can provide additional financial advantages.
By donating appreciated assets instead of selling them, you can avoid capital gains taxes while still receiving a tax deduction for the fair market value of the assets.
Consult with a financial advisor or tax professional to understand the specific tax implications and requirements for donating appreciated assets.
- Utilize Donor-Advised Funds
Donor-Advised Funds (DAFs) offer a convenient and financially wise way to manage your end-of-year donations. You can make a tax-deductible donation to the fund and then recommend grants to your chosen churches or nonprofits over time.
This allows you to take an immediate tax deduction while maintaining flexibility in distributing funds to organizations in subsequent years.
Pro Tip: Look at all the fees associated with ongoing management of the Donor-Advised Fund, including overall administrative fees and investment fees.
- Take Advantage of Employer Matching Programs
Many employers have matching gift programs that can amplify the impact of your end-of-year donation. Find out if your company offers such a program and if they are willing to match your contribution to eligible organizations. This doubles the impact of your donation and maximizes your financial support.
- Consider Gift-in-Kind Donations
A gift-in-kind donation refers to the contribution of goods, services, or non-cash assets to a charitable organization or nonprofit entity.
Unlike monetary donations, which involve the transfer of funds, a gift-in-kind donation involves the provision of tangible items or specific services that have value and can benefit the receiving organization.
If you work for an organization that might consider a gift-in-kind donation, consider setting up a meeting with your charity and your workplace to help facilitate or begin a relationship.
Most volunteer hours are not considered in-kind donations, but the end of the year is a great time to volunteer for a nonprofit of your choice. Many charities are busier than usual at year end, and volunteering is a great way to make a difference.
- Document & Save Receipts
To claim a tax deduction for your end-of-year donation, it is crucial to document and save receipts or acknowledgment letters from the church or nonprofit. These documents serve as evidence of your contribution and are necessary when filing your tax return. Organize and retain these records in a safe place for future reference.
If you make noncash donations — such as stock or real estate — totaling more than $500, complete IRS Form 8283 and submit it with your tax return. In many cases, you will need to obtain an appraisal of the property.
This information was taken largely from Convoy of Hope at End-of-Year Giving [2024 Guide]