? Navigating Charitable Giving in an Uncertain Tax Environment ?

With shifting tax laws and economic fluctuations, planning for philanthropy requires strategic foresight. Whether you are facing a high-income year, selling an asset, or looking to create a lasting charitable impact, understanding tax-efficient giving strategies can help maximize your contributions while minimizing your tax liability.

In this edition of Wiser Way to Give, we’ll explore how to structure your philanthropy in a way that aligns with your financial goals and adapts to an evolving tax landscape.

Why It Matters

Tax policy changes can impact how much of your wealth goes to taxes versus the causes you care about. Rather than giving cash alone, leveraging tax-advantaged strategies can significantly enhance the impact of your generosity while preserving more of your wealth.

Key Tax-Efficient Giving Strategies

? Gifting Appreciated Assets?– Avoid capital gains tax while receiving a full market value deduction for assets such as stocks, real estate, or collectibles. ? Charitable Trusts?– Structures like Charitable Remainder Trusts (CRTs) can generate income for you while securing future charitable gifts. ? Qualified Charitable Distributions (QCDs)?– If you’re 70? or older, you can donate directly from your IRA to reduce taxable income. ? Bunching Donations?– Maximize deductions by concentrating multiple years’ worth of giving into a single high-income year. ? Strategic Business Giving?– Entrepreneurs and business owners can optimize tax-efficient philanthropy through structured giving from business proceeds.

Case Study: Planning Charitable Giving Amid Tax Uncertainty

Meet Tom & Lisa: Managing Philanthropy During Market Volatility

Tom (60) and Lisa (57) are long-time investors and real estate owners who recently sold an investment property for $2 million. While they anticipated some capital gains, they were surprised by the tax bill they faced. As passionate supporters of environmental conservation and healthcare initiatives, they wanted to make a meaningful impact while reducing their taxable income.

They met with their financial advisor to explore the best ways to incorporate philanthropy into their financial planning.

Scenario 1: Direct Cash Donations

?? Donation:?$500,000 in cash to their preferred charities ?? Tax Deduction:?Capped at 60% of their adjusted gross income (AGI), with any excess carried forward ?? Impact:?Immediate benefit to charities, but limited flexibility for future giving

Tom and Lisa initially considered writing a large check to their favorite organizations. However, their advisor pointed out that they would still be left with a substantial tax liability, and once the donation was made, they would have no further control over how the funds were distributed in the future.

Scenario 2: Appreciated Stock + Charitable Remainder Trust (CRT)

?? Donation:?$1 million in highly appreciated stock + $500,000 into a Charitable Remainder Trust (CRT) ?? Tax Deduction:?Full market value deduction for stock and tax-deferred growth within the CRT ?? Impact:?Reduces taxable income while creating a structured income stream from the CRT

Instead of donating only cash, Tom and Lisa decided to take advantage of the appreciated stock they had held for over 15 years. By donating this stock instead of selling it, they avoided the capital gains tax on the stock’s appreciation and still received a full tax deduction for the donation.

Additionally, they worked with their financial advisor to establish a Charitable Remainder Trust (CRT), which allowed them to contribute $500,000 while still receiving a steady stream of income for the rest of their lives. Upon their passing, the remaining trust assets would go to their chosen charities.

Scenario 3: Bunching Donations + Donor-Advised Fund (DAF)

?? Donation:?$1.5 million into a Donor-Advised Fund (DAF) to distribute gifts over time ?? Tax Deduction:?Immediate deduction of $1.5 million, reducing taxable income ?? Impact:?Allows flexibility in distributing funds to charities over multiple years

Tom and Lisa also wanted to have more control over how their contributions were distributed over time. By utilizing a Donor-Advised Fund (DAF), they were able to take a large deduction in the current tax year while reserving the ability to make grants to various charities in future years. This strategy helped them manage their philanthropy in a more structured way, ensuring that the funds were allocated according to their long-term goals.

Results & Decision

After consulting their financial advisor, Tom & Lisa decided on a blended giving strategy: ? $1 million in appreciated stock?to minimize capital gains tax and maximize deductions ? $500,000 into a CRT?to provide them with an income stream and future charitable benefits ? $1.5 million into a DAF?to allow flexibility in distributing gifts over time

By implementing this plan, they successfully lowered their tax liability, preserved family wealth, and increased their ability to give to causes they deeply care about.

Key Takeaways: Smart Giving in an Evolving Tax Landscape

? Leverage Appreciated Assets?– Reduce taxes by donating stocks, real estate, or business interests. ? Utilize Tax-Efficient Trusts?– Structures like CRTs and Charitable Lead Trusts (CLTs) can balance income needs with philanthropy. ? Plan for Long-Term Impact?– Integrate charitable giving into estate and tax planning to align with changing policies. ? Work with Experts?– Engage financial and legal advisors to optimize your philanthropic strategy.

FAQs: Smart Philanthropy & Tax Efficiency

Q: How much can I deduct for charitable contributions? ? Generally, cash donations are deductible up to 60% of AGI, while non-cash assets like stock and real estate are capped at 30% of AGI.

Q: What happens if my donations exceed IRS limits? ? You can carry forward excess charitable deductions for up to five years to optimize tax benefits over time.

Q: Should I wait to donate given tax policy uncertainty? ? Not necessarily—strategic giving can still provide tax advantages while ensuring long-term impact. A well-structured plan adapts to tax changes.

What’s Next in This Series?

?? Upcoming Topics in Wiser Way to Give: ?? Estate Planning with Charity in Mind: A Win-Win ?? The Role of Financial Advisors in Crafting Your Giving Strategy

?? Disclaimer

This information is provided for educational purposes only and should not be construed as tax or legal advice. Please consult with your financial, tax, or legal professionals before implementing any charitable giving strategies. The information presented is based on sources deemed reliable; however, accuracy and completeness are not guaranteed.

?? How Do You Approach Philanthropy?

We’d love to hear your thoughts! Drop a comment below or reach out to us directly to explore creative ways to align your financial goals with your charitable vision. ??