There are tremendous breaks and incentives written into the tax code for charitable giving, and you don’t have to be wealthy to take advantage of them. But they’re most successful for people who truly have a charitable bent — those who sincerely want to see some of their money go to the charity or charities they care about.
That’s because most charitable-giving strategies require a fair amount of planning, paperwork, and set-up and maintenance costs. The tax benefits being what they are, though, it’s worth the effort.
They include:
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- You can sell highly appreciated assets — real estate, stocks, etc. — within a trust and preserve the full fair-market value instead of losing money to capital gains taxes.
- When an asset is sold, there are income tax benefits upfront, based on the value of the gift you’re making to charity, and possibly in the future, depending on how the gift is set up and if it includes an income stream.
- Generally, once you set up your fund or trust, the value of the donated assets comes out of your estate, reducing the amount of money your estate must pay in taxes when you die. That’s helpful because while the exemption for federal income taxes on estates is $5.49 million, several states start taxing estates at limits much lower than that. Oregon’s estate tax, for example, kicks in at $1 million.
The biggest disadvantage to some of the more common forms of charitable giving is that you are, in a way, disinheriting your children. Basically, the charity gets their inheritance. But fear not: There are strategies for “re-inheriting” them — including using the income stream you’ve created within a trust to pay for life insurance premiums. So you can give to your favorite charity and still provide for your heirs — a win-win.
There are many kinds of charitable-giving vehicles: donor-advised funds, pooled-income funds, charitable trusts, life-estate agreements, private foundations and more. When making your choice, you’ll want to consider both the tax implications and how much flexibility you’ll have as a donor — especially if you’re the type of person who likes to have a say in how your money is spent.
It’s important to use a qualified financial professional who can help you plan out your finances, assets, allocations, legacy plans and charitable giving. Planning your finances the right way is vital and is not a do-it-yourself project. With much of your future riding on your income, relying on a professional with adequate experience is a must.
It’s also a good idea to communicate your wishes to your children or any other family members who might be affected by your plans. A conversation now could avoid turmoil down the road, especially if they are expecting to inherit specific assets.
For some families, philanthropy is a way of life, passed down from one generation to the next. But if it’s new to your family, you’ll want to be clear about what you’re doing and why.
Obviously, this is a complicated matter. If you’re considering making charitable giving part of your wealth plan, consult with a specialist — better yet, a team of specialists, including a financial professional, a tax attorney and an estate-planning attorney with experience in charitable contributions.
They can walk you through any complex legal matters, and around any obstacles that could get in the way of your success.
Kim Franke-Folstad contributed to this article.
-
Amazon Ends Free Shipping Benefit Sharing with Non-Household MembersStarting October 1, Prime members will no longer be able to share shipping perks with those outside their household.
-
Big Tech Names Rise Above Broad Weakness: Stock Market TodaySome familiar names enjoyed solid rallies on the resolution of outstanding questions, but macro uncertainty hangs over the broader market.
-
More Than Money: The Hidden Toll of Financial Abuse of Older AdultsFinancial abuse from schemes involving tech support, government impostors, false sweepstakes, grandchild hoaxes and online shopping issues can cause thousands of dollars in losses.
-
I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your DollarsThe world often feels out of control, but here are three ways to use your money — through investments, charitable giving and political donations — to help create a more just and sustainable future.
-
The Unsung Hero of Aisle 5: A Tale of Forgotten Change and Compassion at the SupermarketThis supermarket manager went above and beyond to help when a child forgot her change at the checkout counter. You might be surprised at some of the complications that supermarkets face when it comes to customers' forgotten change.
-
Train, Integrate, Retain: A Strategic Playbook for Adviser OnboardingsBuild a thriving practice by training new advisers with clear goals, structured processes and consistent mentorship for strong team growth.
-
I'm a Financial Professional: Here Are Four Ways You Can Use Debt to Build WealthUsing debt strategically, such as for homeownership, education and more, can lead to greater financial stability and growth.
-
Five Key Wake-Up Calls for Ambitious Business Owners, From a Biz SpecialistYour personal financial plan needs to include a formal exit strategy for your business, or you could be in trouble.
-
I'm a Retirement Psychologist: Here's Why Doing What You 'Ought' in Retirement Beats Doing Whatever You WantTrue retirement freedom isn't about simply doing whatever you want, but about finding purpose and direction through commitments that align with your deepest values and allow you to contribute meaningfully.
-
Tactical Roth Conversions: Why 2025-2028 Is a Critical Window for RetireesThe One Big Beautiful Bill (OBBB) extended today's low tax brackets, but they may not last. Here's how smart planning now can prevent costly tax surprises later.
