Today is North Texas Giving Day, an important occasion in our community — and an annual reminder to think about making charitable donations for both philanthropic and tax purposes! No matter what your interests are, making gifts to causes you care about can be one of the most meaningful uses of your money. 

In the end, what really matters is helping an organization that matters to you. The tax benefits from a donation are just icing on the cake.

Charitable giving can offer a financial benefit for you and your family as well as the intangible rewards that come with helping others. Most donations to charitable organizations come in the form of checks or credit card payments. However, there may be more efficient ways to donate, which in turn can help both the charity and your pocketbook.

Understanding the benefits for different types of donations is important.

Cash, Check or Credit Card

These are the most simple and straightforward ways to donate to charity. It is important for you to keep a receipt from the charity or a bank record to substantiate cash gifts.

For contributions made in 2024, the annual income tax deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). If you make contributions in excess of those limits, you can carry over the excess for up to five years until it is all used, but not beyond that time.

If you do not have appreciated assets to give or if you want to give cash, you may find that the total of your itemized deductions will be slightly below the standard deduction. In that case, it could be beneficial to combine or bunch several years of tax contributions into one year.

Appreciated Stock

With the stock market gains over the last two years, donating appreciated assets such as stock can have tremendous advantages. Donors can deduct gifts of stocks that have been held more than a year (long enough to qualify as long-term capital gains) at the fair market value, rather than at the purchase price.

The downside is that your deduction can offset only up to 30% of your AGI. If you donate stocks you have held for less than one year, you will receive a deduction for their cost basis, rather than fair market value. However, the deduction can offset up to 50% of AGI.

Often, donors may gift the stock with the biggest winnings, which maximizes savings on capital gains, and then buy back the same stock with cash — which in turn raises the cost basis. If you happen to own a stock or mutual fund for more than one year and do not have the cost basis, this holding can be ideal for donation to charity.

The chart below shows the difference between selling appreciated stock and then donating cash to charity, compared to gifting appreciated stock. Not only would the individual save on taxes, as the charity does not pay capital gains tax, but the charity would also receive additional monies!

IRA Qualified Charitable Distributions (QCD)

This is an option only for donors over the age of 70 1/2. Qualified Charitable Distributions allow individuals to donate up to $105,000 annually (up from $100,000 last year) directly from an IRA. Donor Advised Funds are excluded from this charitable donation; it must go to a qualified charity.

The QCD reduces the value of the IRA and does not count towards the donor’s taxable income. It also counts toward satisfying the annual required minimum distribution. In 2024, donors can also direct a one-time QCD of up to $53,000 to a charitable remainder trust or charitable gift annuity.

Donor Advised Fund (DAF)

Picture a donor advised fund as your family foundation, without the headache and administrative hassle of setting up a family foundation. A donor advised fund is a charitable account established at a public charity or community foundation that allows donors to recommend grants over time. The donor decides the timing of the donation, the charity that will receive the donation and the amount of the donation made from the DAF. The donor claims the tax deduction upon funding of the donor advised fund.

There is not a requirement that the DAF must distribute 5% of the fund each year, which may allow the DAF to grow, expanding the available dollars to donate to charities. Donor advised funds also can be a charity beneficiary of IRA assets.

At CD Wealth Management, charitable giving plays a significant part in our company’s culture. We believe in giving back to the community, with our time as well as our pocketbook. We support many causes in the Dallas/Fort Worth Metroplex and encourage our team members to get involved.

During the holiday season every year, we make a donation in each of our team members’ names to their charity of choice as a form of gratitude that also helps a great cause. It is part of who we are as a firm — and who we are as individuals. 

Please do not hesitate to reach out to us to discuss options to help you determine the best way to make the most of your charitable donations. Remember to visit the North Texas Giving Day website and look for your favorite charity. (Please note: all funding options above may not be available.)

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client. 

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market. 

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.

Sources: Fidelity, Schwab, Investopedia