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Charitable Contributions Are a Big Part of Tax Season

When tax season rolls around, it doesn’t just mean a time to crunch numbers; it’s also the perfect opportunity to kick off meaningful conversations with your clients about enhancing their approach to charitable giving. Diving into a client’s tax return, particularly looking at the charitable contributions made in 2023, can open up discussions not just about the amount given but also about the method of giving—whether through cash or other assets. This conversation can naturally progress to strategizing the most beneficial ways to support charitable causes in 2024 and beyond.

Cash Isn’t Always King

One of the first revelations might be that giving cash to charity, while straightforward, isn’t always the smartest move tax-wise. There’s a smarter strategy that can benefit both you and your chosen charities more: donating highly appreciated assets. Think of stocks that have soared in value since you acquired them. By directing these towards a fund at your local Community Foundation, you can support your favorite causes more effectively. It’s a win-win: your charities get more support, and you optimize your tax benefits.

Look Beyond the Bank Account

But why stop at stocks? The truth is, the most valuable assets most Americans have aren’t sitting in their wallets or bank accounts. Retirement accounts and homes often hold the most value. So, it makes sense to think outside the box about what you can give. Real estate, collectibles, and closely held stocks can all be incredible gifts. And for those over 70 ½, a Qualified Charitable Distribution from an IRA can be a game-changer. Each of these options requires a bit of thought and planning but can significantly amplify the impact of your giving.

Community Foundations: Your Charitable Contributions Navigator

Feeling overwhelmed? That’s where your Community Foundation comes into play. These organizations are equipped to guide you and your financial advisor through the maze of charitable contributions. They can help pinpoint which assets are best suited for donation and how to structure these gifts to achieve your philanthropic goals efficiently.

Closing the Loop: IRS Reporting

Remember, the tax man cometh – and he’s got rules. Non-cash gifts to charity have different reporting requirements than cash gifts. Familiarizing yourself with IRS Form 8283 is crucial for any deduction claims for non-cash assets valued at $500 or more. It’s a bit of paperwork, sure, but it ensures that your generosity doesn’t get tangled up in red tape. Plus, Community Foundations can help confirm receipt and manage the documentation, making the process smoother for everyone involved.

Questions to Ignite Your Philanthropic Journey

Ready to dig deeper into your charitable contributions strategy? Here are a few conversation starters for your next meeting with your financial advisor:

• Which charities do you find yourself consistently supporting?
• Interested in turning what would be tax dollars into charitable contributions?
• How important is public recognition for your donations?
• Looking to involve your family in your philanthropic efforts?
• What values do you hope to pass down through your giving?

These questions not only help clarify your charitable intentions but also enable organizations like Community Foundations to tailor their support to your needs. Whether you’re looking for guidance on local charities or broader philanthropic strategies, these foundations are a valuable resource for making your charitable giving as impactful as possible.

In all, tax season is more than just a time to settle up with the IRS; it’s an opportunity to strategize your charitable giving for the year ahead. By exploring a variety of giving options and leveraging the expertise of the Community Foundation, you can ensure your philanthropic efforts are both rewarding and tax-efficient.