As fulfilling as donating money or other assets to a charitable, philanthropic or other not-for-profit organization can be, let’s not overlook the tax benefits that accompany a donation or gift.
“Outside of the ‘feel-good’ sentiment, charitable giving can reduce tax liability and put one in a better financial position,” observes Taylor R. Schulte, a Certified Financial Planner™ with Define Financial in San Diego, Calif.
Whether a donation is made in the form of cash, an investment security such as shares of stock, tangible goods like clothing or a car, or some other asset, it can reduce the donor’s income tax (through deductions), capital gains tax (by donating securities or property whose value has appreciated) and/or estate tax (by reducing the taxable amount in an estate) burden, thanks to federal tax laws. “We are a philanthropic nation,” says Certified Financial Planner™ Rita Cheng, founder of Blue Ocean Global Wealth, an investment advisory firm in Rockville, Md., “and our tax code encourages charitable giving.”
For people with charitable or philanthropic inclinations, here’s a look at some of the strategies and techniques to maximize the tax benefits that accompany their generosity.