‘Tis the season for year-end giving. From putting gifts under the tree for a child to discover on Christmas morning to donating canned goods to the community or church food pantry for the holidays, giving at this time of the year carries with it a special feeling. Giving by 11:59 on Dec. 31 can also be wise.   

“Bottom line, people give to help other people, not to get a tax break, nevertheless it’s  important to be tax smart when you are doing your giving,” said John Hixson, CFP.

Being tax-smart can often benefit the qualified non profit. This article outlines four smart strategies for year-end giving, including beginning a Community Foundation Southwest Louisiana Donor Advised Fund.

Here’s the first. Most taxpayers know to claim itemized deductions, for example charitable contributions, mortgage interest and medical expenses, when the itemized amount exceeds the standard deduction, $12,950 for single and $25,900 for married filing jointly.

But they may not have realized the advantage of “bunching gifts” as a way to help their favorite cause in a way that’s also tax savvy.

“If a couple generally gives $10,000 every year to their favorite charity, they can bunch up those gifts,” Hixson said. “If they have the cash, they can give $30,000 this year and none the next two.”

This can drive up the itemized deduction significantly, reducing the adjusted gross income and lowering the tax burden.

Mollie Broussard, CPA, explained another “tax smart” way to give.

For those who are 70-and-six-months of age or older, the retirement account minimum distribution can go directly to a charity to reduce the year’s adjusted gross income or prevent a move into a higher tax bracket. The distribution must be made directly to the charity and never pass through the hands of the IRA holder.

The value of charitable gifts that can be deducted from a tax return usually ranges from 20 to 60 percent of the donor’s adjusted gross income. This Adjusted Gross Income (AGI)-based limit does not apply to Qualified Charitable Deductions (QCD) allowing donors to make larger gifts.

That’s not the only way to get a tax advantage, plus benefit the non-profit 5013c more. Giving appreciated property such as stocks, bonds and mutual funds can also result in a “larger” gift for the charity and represents a more strategic approach to giving, Hixson said.

The federal tax code allows the contribution of long-term appreciated securities held at least 12 months, such as stocks, bonds and mutual fund shares. When these appreciated securities go directly to a charity, the giver is not required to pay capital gains tax on the appreciated value. Donating stock may not require the paperwork and phone calls that some think.

The fourth and final way to help others before the year’s end is to open a Community Foundation Southwest Louisiana Donor Advised Fund (DAF).

“The Community Foundation connects people who care with causes that matter,” said foundation president and CEO Sara Judson.  “Funds can be created with $10,000 or more and the donors can recommend grants to nonprofits at any point. Your fund is invested and grows, tax free.”

These funds are pooled, invested with partners at the Baton Rouge Area Foundation and Northshore Community Foundation and are actively managed by highly-rated money managers, JP Morgan and Goldman Sachs.

In December 2021, Mike and Tobie Hodgkins realized they had not made any charitable contributions “thanks to the pandemic and hurricanes,” Tobie Hodgins said. “After talking to Sara, we realized our best option was to open a donor-advised fund with the Community Foundation of SWLA. The donation would allow us to make a larger last minute – literally Dec. 31– gift in 2021 for tax purposes, but in a way the money would grow and allow us to donate to other groups and causes that were important to us over a longer period of time. It was an extremely easy process and we will definitely be making another donation to our fund this year.”

To open a Donor Advised Fund at the Community Foundation of SWLA, contact the office by noon on Dec. 31.

Credit card donations must be made by 11:59 p.m. Dec. 31 in your time zone for 2022 credit. Check donations must be postmarked by the USPS on or before Dec. 31. Wire and ACH transfers must be sent by Dec. 31.

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None of the information in this article is intended to be tax or legal advice. Consult your tax professional to determine the impact of philanthropy on your financial situation.