Maximizing Charitable Contributions in 2024 💝
This year brings promising opportunities for philanthropic efforts, especially with the surge in market performance. As the holiday season approaches, you might want to consider how to channel some of your investment gains into charitable donations. Following Cyber Monday, Giving Tuesday offers a chance to reflect on contributions to charities that resonate with you. With significant gains in the S&P 500, opting for non-cash assets like stocks, mutual funds, or cryptocurrencies for donations can often yield better benefits than cash slips.
Smart Donations Can Save You Tax Dollars 🏦
Brandon O’Neill, a charitable planning expert at Fidelity Charitable, highlights the advantages of donating appreciated assets. Rather than simply contributing cash, giving away assets that have grown in value can be more advantageous for your financial situation. When you choose to donate an appreciated asset, there are two main benefits:
- Receive a deduction on your taxes.
- Avoid paying capital gains tax that would apply if you sold the stock yourself.
This strategic approach allows for maximum benefit. In 2023, non-cash donations, such as stocks, accounted for 63% of contributions to Fidelity Charitable, indicating a trend towards more tax-efficient giving.
Understanding Charitable Deductions 📜
When you detail your deductions on your tax return, if these surpass the standard deduction threshold of $14,600 for individuals or $29,200 for couples filing jointly in 2024, you open up the possibility of writing off your charitable contributions. If you’ve owned the asset for a minimum of one year, you can instruct your broker to transfer it to your chosen charity, allowing you to calculate your deduction based on its market value at the time of the gift.
The ideal assets to donate are typically those with low initial investment costs and significant appreciation. As Miklos Ringbauer, a certified public accountant, explains, “You gain the fair market value for the donation rather than just the cost basis, increasing its tax impact.”
Hot Stocks Available for Donation in 2024 💹
This year has seen remarkable growth in many S&P 500 stocks. Companies like Palantir Technologies and Vistra Corp. have skyrocketed over 300%, representing significant potential for those looking to donate. Following this trend can help you strategically diversify your portfolio while contributing to significant causes.
One consideration when donating is to reduce concentrations in stocks that have seen substantial growth. This can ultimately minimize portfolio risk. Christine Benz from Morningstar suggests that employer stock, which can heavily skew an employee’s portfolio, serves as an excellent candidate for donation. “With concentrated holdings adding a level of risk, dispersing those gains could greatly enhance your financial stability,” she noted.
Effective Strategies for Charitable Giving 🎯
With such a high standard deduction, you may find it beneficial to consolidate several years’ worth of donations into one year. By transferring appreciated assets into a donor-advised fund, you can streamline your charitable contributions and support various organizations over time. Doing so allows you to alternate between itemizing deductions one year and taking the standard deduction in others, optimizing your tax situation.
Considerations for Older Investors 👵👴
For those aged 70 ½ years and older, a qualified charitable distribution (QCD) from an individual retirement account (IRA) can be particularly advantageous. If you don’t need to tap into your IRA funds, using QCDs can provide tax benefits. While traditional IRA withdrawals incur taxes, QCDs sent directly to qualified charities do not. In 2024, eligible IRA holders can exclude up to $105,000 in QCDs from their taxable income.
Starting QCDs at age 70 ½ can help in managing your IRA balance now, which may also reduce future required minimum distributions (RMDs). This proactive method is an excellent strategy for maintaining financial flexibility.
Conclusion 📝
This year, leveraging appreciated assets for charitable donations not only supports causes you care about but also provides significant tax advantages. By understanding the benefits of donating stocks or cryptocurrencies and employing effective strategies, you can maximize your contributions while minimizing taxable income. Careful planning empowers you to make well-informed decisions that resonate with both your financial goals and philanthropic aspirations.
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