One CPA’s Thoughts on Charitable Giving

I always think of my parents when I think about charitable giving or serving for that matter. My parents were generous people that encouraged us to think in terms of becoming generous adults. “You will never miss the money that you give to the church,” Dad used to say. Not sure that is an original saying, but he said it to us kids and you know, I’ve never missed the money we have given to the church or to charity.

I have always admired and been amazed by the clients I have worked with over the years that prioritized their giving, not for tax reasons, but because they felt it was their obligation. Many never realizing any additional tax savings because the 10% of their gross income or more that they gave was not more than their Standard Deduction already allowed to taxpayers.

Speaking of the Standard Deduction, in 2021, that amount is $12,550 for single filers and $25,100 for married couples filing jointly. What that means is if your medical expenses, taxes, home mortgage interest, charitable deductions and a few other items exceed the number above, and you itemize them on Schedule A of your Form 1040, your taxes will be reduced. Important point to remember, it is not dollar for dollar. Even if you don’t itemize, you can still deduct up to $300 ($600 if you are married filing jointly) of direct cash gifts to public charities in addition to the Standard Deduction amount.

So, in addition to cash contributions, let’s review a couple of charitable giving options to maximize income tax deductions. Year-end is upon us and by the time this article is published, hopefully you have done your planning, but if not you will need to consider and implement some straight forward planning that can be done quickly.

Consider donating appreciated securities that have been held for more than one year, rather than cash. The market has done well and instead of selling appreciated securities to make cash contributions that generates a taxable gain, many charitable organizations accept donations of stock instead. You get a deduction for the full fair market value of the security and the charity sells the security and receives the full value at date of sale with no taxes paid on the gain.

For larger gifts, opening and funding a Donor Advised Fund (DAF) is appealing to many as it allows for a tax-deductible gift in the current year and also the ability to dole out those funds to charities over future years. The fund can be added to over time and is a good way to bring your children into charitable planning as you make decisions on gifts from your fund. There are several good options here. One you can look at as an example is Vanguard Charitable.

Give your CPAs and financial planners a call to discuss your options. Time to stop putting things off and do some charitable planning that works for you. Do something special this year and set the example of generosity for your family. So, good cheer to all! Have a Merry Christmas and a Happy and Prosperous Holiday Season and New Year!

Published in the Victoria Advocate

Lane Keller CPA/CFP® is a managing member of Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.