Supporting philanthropic causes not only allows us to impact our community, region or planet, but often results in a tax deduction. Due to the higher standard deduction provided under the 2017 Tax Cuts and Jobs Act, many taxpayers find their typical annual charitable giving does not provide an additional tax benefit. It is important to work with your tax advisor to determine whether strategies, such as bunching multiple years of giving within a single calendar year, using a donor-advised fund (DAF), or making qualified charitable distributions (QCDs) from your traditional IRA would increase the tax savings associated with your charitable giving.

Deductions for charitable contributions are limited to a stated percentage of adjusted gross income (AGI) in the year the deduction is taken. Limitations range from 20% - 60% of AGI based on the type of gift and nature of the receiving organization (e.g., gifts of long-term appreciated securities to a DAF are typically deductible up to 30% of AGI). Contribution amounts in excess of these deduction limits may be carried over, with a limit of five subsequent tax years.

Timing is very important for charitable donations made near year end. Generally, a charitable donation is deductible in the year it is delivered to the charity. While transfers of cash can be completed relatively quickly, it is often more tax-efficient to donate appreciated assets. Depending on the type of assets being donated, the method of delivery, and institutions involved, it is often necessary to organize and complete such gifts in early December, allowing ample time for processing and delivery to the charity.

Here is a list of Schwab’s 2023 year-end giving deadlines.

For more information on QCDs, click here.