Tips for Charitable Giving and Year-End Tax Planning

Tips for Charitable Giving and Year-End Tax Planning

One strategy to help you with year-end tax planning is charitable donations.

As the year draws to a close, you should consider your year-end tax planning. One strategy to help you with this is charitable donations. Not only is December a critical time for many nonprofits to meet their financial goals, but smart planning now could yield significant tax benefits come the end of the year. With so many deserving causes available, it is important to explore each of your options to make sure that you are making the most of your tax savings while supporting organizations and causes that are important to you. Baltimore-Washington Financial Advisors is a fee-only fiduciary that is here to help with this process. Read on to learn a few tips regarding charitable giving and its relation to year-end tax planning.

Individual Retirement Account (IRA) and Charitable Giving  

One way to save for retirement is through your Individual Retirement Account, or IRA for short. This kind of account allows you to invest funds that will grow tax-deferred until you withdraw them during retirement. But did you know your IRA could also be a powerful tool for charitable giving? If you are over the age of 70, you can make a Qualified Charitable Distribution (QCD) from your IRA directly to a charitable organization. This is a tax-smart way to give, as the QCD counts towards your Required Minimum Distribution (RMD). This means you won’t have to pay taxes on the QCD withdrawal. It is a smart way to avoid income tax on some withdrawals from your IRA while supporting the charities you love.

Donating Non-Cash Assets

Another effective way to maximize your charitable impact is by donating appreciated non-cash assets, like stocks. By donating the asset instead of donating the proceeds from the assets like stocks. By donating the asset, instead of donating the proceeds from the asset’s sale, you could eliminate capital gains taxes on the gifts and get an itemized deduction for the value of the donation. This is a win-win for both you and the charity you pick.

Donor Advised Fund (DAF)

If you are looking for a more structured approach to charitable giving, consider a Donor Advised Fund. With a DAF, you can make tax-deductible contributions of cash or non-cash assets at any moment, not just at the year’s end. If you want to learn more about charitable giving and how it can help you with year-end tax planning, contact the team at Baltimore-Washington Financial Advisors!

For All Types of Financial Services, Contact Baltimore-Washington Financial Advisors Today!

Baltimore-Washington Financial Advisors is a nationally recognized Fee-Only and Fiduciary wealth management firm, providing comprehensive wealth management since 1986. We integrate investment management, retirement and estate planning, and tax services so you can relax knowing your money is safe. We serve clients throughout the Mid-Atlantic, nationally, and specifically in Annapolis, Baltimore, Ellicott City, Hunt Valley, Catonsville, Pikesville, Bethesda, Columbia, Rockville, Gaithersburg, and more! We’re here to provide you with the best services and advice when you need it. For more information on how we can help, visit our website, or give us a call at 410-461-3900!