As we enter the holiday season, you may be thinking about your shopping list. It’s always enjoyable to find just the right gifts for your family and friends – but why not take the next step and explore charitable giving opportunities?
You may already make donations to various groups. But it’s possible you could expand your giving in ways that provide tangible benefits both to your recipients and to yourself.
Still, you may have doubts about just how much more you can do – after all, aren’t older, wealthier people the ones who do most of the serious charitable giving? Actually, being “charitable” is different for everyone. And even if you’re early in your career and in your financial journey, you do have options for giving back to causes and organizations that are meaningful to you.
Potential benefits for the charity and for you
When considering how you might elevate your charitable giving, you’ll want to first think about where you’d like to show your support. Are there groups you’re interested in beyond the ones to which you’ve already donated? It’s a good idea to evaluate organizations to ensure they’re reputable and that they’re using most of their contributions for their work rather than administrative costs. You can find this information, and more, on Charitynavigator.org, which provides a rating system to help you evaluate the charities of your choice.
Your next step might be to consider what types of gifts you’d like to make, along with their tax benefits and trade-offs. Consider the following when it comes to tax deductions:
- If you’ve been contributing relatively small amounts to charitable groups, and you take the standard deduction when you file your taxes, your charitable contributions won’t provide any tax advantages. A few years ago, tax law changes dramatically increased the standard deduction, which, in 2022, is $25,900 if you’re married and filing jointly or $12,950 if you’re single (or if you’re married and file separately). As a result, many people are no longer able to itemize deductions, such as charitable contributions.
- If you can afford to make sizable charitable gifts, and you add these gifts to other potential deductions (like mortgage interest payments and state and local taxes), your overall deductions could add up to more than the standard deduction. Although you may not give enough to be over the standard deduction amount – maybe not at this stage of your life – you can see how much your generosity can be rewarded.
- When itemizing deductions, the IRS requires that you substantiate your donation. For amounts under $250, your own records, such as a canceled check, are fine. For donations $250 or over, you must obtain written acknowledgment of the donation from the charity.
- Cash – If you itemize on your tax returns, you can generally deduct up to 60% of your adjusted gross income (AGI) for cash gifts you make to IRS-qualified public charities.
- Appreciated stocks or other securities – You’re not limited to just making cash gifts – you can also donate financial assets, such as stocks. You’ll receive a tax deduction based on the fair market value of the stocks or other securities, up to 30% of your AGI. Neither you nor the charity pay the capital gains tax – meaning more goes to the charity, and you get a larger income tax deduction.
Beyond dollars: Gifts of your time
While your financial contributions to charitable groups are certainly meaningful and will be greatly appreciated, you have much to offer beyond your checkbook or stock portfolio. Specifically, by sharing your skills and giving your time, you can make a difference to any number of charitable groups.
Here are some ideas:
- Tutor a student. Many schools are short-staffed and would welcome volunteers to tutor students in math, reading and other subjects.
- Assist at an animal shelter. If you’re a pet lover, consider helping out at a local animal shelter. Volunteers are always needed to keep animals entertained, groomed and fed.
- Coach a youth sports team. If you have young children playing sports, you go to their games anyway, so why not volunteer as a coach? Even if you don’t have kids, your willingness to coach would be welcome.
- Volunteer at your house of worship. You could help your house of worship in many ways. If you have a particular area of expertise, such as finance or marketing, you could put your talents to work in that way.
- Mentor a child. Groups such as Big Brothers Big Sisters need volunteers to provide adult mentors for kids.
- Host a foreign exchange student. By bringing exchange students into your home, you’ll not only give them an appreciation of our country, but you’ll also broaden your own horizons as you learn about other cultures.
- Help out at a homeless service agency. Many homeless shelters rely on volunteers to assist with a variety of jobs.
Note: While volunteering can be impactful and fulfilling, you can't deduct your donated time – even for professional services – from your income tax return. However, you can claim reasonable expenses such as parking or the purchase of a required uniform for an event.
For more details about incorporating charitable giving into your financial strategy, talk with your financial advisor.