Ask Sexton Advisory Group: How Do I Amplify My Charitable Giving Power?

With Giving Tuesday around the corner, you may be thinking about how to make charitable donations that make a difference. With over 20 years of personal finance and retirement planning experience as a financial consultant and CEO of Sexton Advisory Group in San Diego, CA, here are some pointers on how how you can amplify your charitable giving power while reducing your taxable income this holiday season.

1. Donate non-cash assets — Instead of cash, consider donating appreciated non-cash assets, like real estate or publicly traded securities, directly to a charity to eliminate the capital gains tax you would incur from selling these assets. As long as you’ve held the assets for longer than a year, eliminating capital gains tax can free up to 20%, allowing you to increase your charitable contribution while benefiting from a tax deduction.
2. Donate private business interests —Donating private business interests, including C-Corporation, LP, or LLC interest could also make good charitable donations, especially if they’ve been held for more than a year and retained more value than other assets you’re considering donating. Again, this method eliminates long-term capital gains tax while providing a tax deduction.
3. Convert a traditional IRA into a Roth IRA —If you have a traditional IRA, converting it into a Roth IRA and making a charitable contribution in the amount you converted and claiming a deduction can lower your tax bill. A Roth IRA can provide a range of benefits, including tax-free growth and withdrawals, and no annual RMDs.
4. Donate directly from your IRA to a charity —If you're 701?2 or older, you can donate money directly from your IRA to a qualified charity (a 501(c)(3)) instead of withdrawing it yourself. You can give up to $100,000 this way each year, and it counts toward your Required Minimum Distribution (RMD) for the year. For example:If you’re required to take $30,000 from your IRA this year but donate $20,000 directly to a charity, only $10,000 will count as taxable income. This reduces your taxes while still satisfying the RMD rules. If you're married and both you and your spouse are 701?2 or older, each of you can donate up to $100,000 per year from your own IRAs, for a combined total of $200,000.