Cortburg Speaks Retirement

6 Year-End Giving Tips for Tax Savings

• Miguel Gonzalez, MBA, AIF®, CPFA®, CRC® • Season 2024 • Episode 220

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In this week's holiday episode, Miguel Gonzalez, Certified Retirement Counselor, shares 6 effective strategies to make the most of your charitable contributions while saving on taxes.

Cortburg Retirement Advisors is a boutique financial planning firm committed to helping you grow, protect, and preserve your assets from your first job to retirement. We specialize in wealth management, estate and tax planning, group retirement, employee benefits, insurance, and retirement planning to navigate any economic climate.

Miguel Gonzalez, a Retirement Specialist with 20+ years of experience, offers expertise in retirement income planning, investment management, and retirement plan design. With an MBA from Columbia Business School, and professional experience with JP Morgan Chase, Merrill Lynch, and more, Miguel is a trusted advisor for his clients.




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Welcome to Cortburg Speaks Retirement Podcast
with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®

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Welcome to Cortburg Speaks Retirement

An audio podcast about investing in the stock market, financial planning, money management and retirement planning.  Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.

Now here is your host, Miguel Gonzalez.

 Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.   

The holidays are finally here  – a time of giving, goodwill to others, and embracing traditions. For many people, giving to a charity or organization that aligns with your values provides a sense of fulfillment. If you itemize deductions on your income tax return, you can deduct gifts made to charities. Here are six year-end giving strategies to spread holiday cheer with the additional gift of potential tax benefits.

 

1. Making cash gifts

If you give cash, you may deduct up to 60% of your adjusted gross income (AGI). Giving cash also provides the charity better flexibility when it comes to spending the money to help the people, animals, or the environment. Two disadvantages of giving a cash gift are liquidating a stock, bond, or other appreciated asset and being responsible for the generated capital gains tax, and you also don’t always know how the money is necessarily being used.

 

2. Donating Stocks, Bonds, or other appreciated securities

If you are considering donating the earnings from appreciated stocks, bonds, real estate, or other appreciated non-cash assets directly to your charity of choice you may want to think about giving the appreciated asset directly to the charity over giving cash after selling them. This may be a beneficial strategy as it allows you to avoid the capital gains tax so long as you adhere to the rules. In addition, you would be eligible for a charitable income tax deduction up to the fair market value of the security you donate, up to 30% of your AGI. A financial professional can help you with the nuances of this type of giving strategy.

 

3. Donor-advised fund (DAF)

A DAF is a fund managed by a third party that handles charitable donations given to a specified charity. Donors become eligible for an immediate tax deduction in that calendar year. They can give anonymously, knowing that the money can grow tax-free, and may be able to bypass capital gains taxes. There are various ways to give, including cash, stocks, bonds, and other appreciated assets. There are a couple of things to consider when deciding on a DAF. Initially, there may be a high start-up cost. Funds are not eligible for donor benefits, for example, scholarships and tickets, and there is limited control regarding grant-making. Being a DAF donor also gives you the authority to recommend grants from the fund to charitable organizations you support over time.

 

4. Bunch your charitable gifts

Bunching your donations is a tax strategy where you make a multi-year contribution in a single year to maximize your itemized deduction for the year in which you make your donations. The strategy is to make your itemized deductions (including charitable donations) large enough to exceed the standard deduction amount. Bunching charitable gifts involves timing and the amount you plan to give. This has become a popular strategy after the Tax Cuts and Jobs Act of 2017 that nearly doubled the standard deduction through 2025. You have to remember that your donations must be to qualifying charitable organizations, generally non-profits with tax-exempt status under section 501(c)(3) of the IRS code.

 

5. Contribute restricted stock

If you contribute directly to a public charity, including sponsors of donor-advised funds, the donor can qualify for an income tax deduction for the full fair market value (FMV) of the securities in an amount up to 30% of the donor’s adjusted gross income, with a five-year carryforward for any excess not deductible in the year of the contribution. When giving stock as opposed to the after-tax proceeds from selling the stock, the charity receives the full value of the appreciated stock and the donor is not subject to capital gains tax on the appreciation in the stock.

 

6. Combine tax-loss harvesting with a cash gift

Tax-loss harvesting involves using capital losses to offset capital gains up to $3,000 of ordinary taxable income. Donors who itemize their deductions can then claim a charitable deduction for donating cash from the sale proceeds. But, to use this method, you have to understand when to apply it. Tax-loss harvesting only works on taxable investments.

Several retirement accounts, for example, IRAs and 401(k)s are tax-deferred and therefore are not eligible to be used to offset taxable gains. Also, if you are somebody that just invests in mutual funds or exchange-traded funds (ETFs), tax-loss harvesting may be more difficult because to use tax-loss harvesting, the whole fund has to be down, therefore limiting its tax-saving capability.

 

And finally, remember that charitable giving and the potential tax benefits are often complex and decisions not carefully weighed could impact you and your financial goals. Consider consulting a financial professional before making any financial decisions that could put a damper on your holiday cheer this year. Happy Holidays!

Make sure to visit our website, www.CortburgRetirement.com. Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances.  As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.

This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.  

 

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