Charitable giving is one of the most rewarding ways to use your resources, especially in retirement. Whether you're supporting your church, a local animal shelter, or a cause close to your heart, generosity doesn’t just make a difference for others – it can also make a meaningful difference in your financial life.
Too often, people give from the heart but forget to bring their head into the conversation. The truth is, how you give matters. With the right strategy, your contributions can do more good – for the causes you care about and for your tax bill.
Many families assume that writing a check is the best way to give. While there’s nothing wrong with giving cash, it’s often the least efficient option. If you own appreciated stock or property, donating those assets directly to a qualified charity allows you to avoid capital gains tax while still deducting the full market value if you itemize on your tax return. More goes to the charity, less goes to the IRS, and you keep your financial vision intact.
For retirees over age 70½, Qualified Charitable Distributions (QCDs) are an incredibly effective way to give. You can donate up to $108,000 per year directly from your IRA to a qualified charity. This counts toward your Required Minimum Distribution (RMD) but doesn’t increase your taxable income. It’s especially valuable if you don’t itemize deductions or want to manage your Medicare premiums by reducing your reported income.
You may want to consider a strategy that allows you to increase the tax impact of your giving over time. Donor-advised funds, for example, let you take an immediate deduction when you contribute but distribute gifts to charities in future years. It gives you flexibility while locking in the deduction now.
Another option is “stacking” your charitable contributions. If you usually fall just under the standard deduction threshold, consider giving multiple years’ worth of donations in one year to exceed it. You can still pace out your actual donations while gaining more in tax savings.
Smart giving strategies include:
- Donating appreciated assets to avoid capital gains taxes.
- Using Qualified Charitable Distributions to reduce taxable income.
- Stacking donations into a single year to surpass the standard deduction.
- Leveraging donor-advised funds for flexible, long-term giving.
- Aligning charitable gifts with your estate and legacy planning.
Charitable giving should reflect your heart – but that doesn’t mean it should ignore your financial plan. With just a little forethought, your generosity can go further while helping you maintain your retirement goals.
You’ve worked hard and saved well. Now’s the time to give with purpose – so your impact is maximized, and your finances stay on track.
Financial Enhancement Group is an SEC Registered Investment Advisor.
