Five Smart Strategies for Year-End Charitable Giving

By on November 28, 2017

From turkey and stuffing to cranberry sauce and pumpkin pie, this is one of the most delicious seasons of the year. What I love most about Thanksgiving, though, is the generosity of spirit it inspires. If you’re looking to make a difference for your favorite charity this year, consider these five ways to make your charitable dollars go farther.

Give Appreciated Stock

It’s been a great market this year. If you have shares you’ve owned for at least a year that have appreciated in value, you can donate them and avoid paying capital gains tax on those shares while getting a tax deduction on the full value of the shares.

For example, over a year ago you bought a share of Apple stock at $100, and it’s now trading at $175. If you sell it, you’ll pay capital gains tax on the $75 difference between the sale price and the purchase price. If you donate the share instead, you will avoid paying the capital gains tax and can take a tax deduction for the $175 donation to your favorite charity.

Extra Tip: Let’s say you purchased one share of Apple when it was $100 and then decided to buy another share at $150. Now, you want to sell both your shares for $175 each and would also like to make a charitable donation. To do so tax efficiently, you can choose to donate the “lower basis” share (the one you bought at the lower price) to charity and sell for yourself the “higher basis” share. You’ll only pay capital gains tax of $25 ($175-$150) on the share you sold, and you’ll get a tax deduction for the full $175 for the share you donated.

Make a Charitable IRA Rollover

If you are age 70 ½ or older, you can give up to $100,000 each year to charity directly from your IRA, and it won’t be included in your gross income for tax purposes. In other words, you won’t have to pay tax on that $100,000. This charitable rollover also counts towards your required minimum distribution (RMD) for the year. You can make a charitable IRA rollover from either a Roth or a traditional IRA.

Do note that you must have the check made out directly from the IRA to the charity; it cannot come to you in any form. Also, the charity must be recognized under IRS Section 170(b)(1)(a) as a charitable organization and cannot be a donor advised fund or private foundation. Any charity that’s a 501(c)3 is fine.

Set Up a Donor Advised Fund

If you’re not sure where you’d like to give, this can be a wonderful option for you! Set up a donor advised fund, and any donations you make to the fund are tax-deductible in the year you make them. If you donate appreciated stock to your donor advised fund, you’ll take advantage of two smart strategies for giving!

Many different organizations, from community foundations to companies like Schwab and Vanguard, offer donor advised funds. Since each differs in terms of their minimum investment amounts, fees, and how much you need to maintain in the account, look at the terms and conditions carefully or talk with your financial adviser about possibilities.

Also, note that any donation you make to a donor advised fund is irrevocable, meaning that you can’t change your mind after you make it. In addition, since you’ve already taken a tax deduction for the full value of your contributions to your donor advised fund, you cannot receive any benefits from a charity (such as a membership, tickets to an event, or merchandise) in exchange for your future donations. Receiving benefits that have a fair market value would mean you were “over-deducting” on your taxes.

Make an In-Kind Donation

Donating clothing, toys, or other items can also make a significant difference, especially around the holidays. Just be sure to get an itemized receipt for any donations you’re making that exceed $250. The charity should list your name, address, and the date of your donation. You will need to fill in the “fair market value” amount of your donation.

Donate With a Match

Of course, you can also donate cash directly to your charity of choice. At this time of the year, many charities have matching campaigns, effectively doubling every dollar donated. Keep an eye out for those matching opportunities or consider setting up a matching opportunity yourself for your favorite charity. In addition, your employer may also match your charitable donations as a benefit for employees.


If you have any questions about how to best use any of these giving strategies, please feel free to reach out to us at (858) 509-9500 for a free consultation with one of our financial advisors. Enjoy this season of giving!


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