From Ryan DeMarco, CRPC™
Edward Jones Financial Advisor, 111 N. Main St., Bluffton, 567-226-4506

Now that it’s the holiday season, gifts are probably on your mind – and you might intend for some of those gifts to go to charities. Although your intentions are good, you could be shortchanging both your recipients and yourself with your method of giving. But with some guidance, you can make choices that work well for you and those charitable groups you support.

Of course, you could simply give money to these groups. However, by donating other types of assets, can you increase the value of your gift and gain greater tax benefits, too?

It’s certainly possible, but your ability to gain any tax advantages depends somewhat on whether or not you can itemize deductions on your tax return. Due to legislation passed a few years ago that significantly increased the standard deduction, many people may no longer be itemizing. But if you still itemize, you can generally deduct up to 60% of your adjusted gross income for cash donations to IRS-qualified charities.

Another contribution strategy involves donating other assets, such as stocks. You could donate stocks directly to a charitable group, but you might gain more benefits by making an irrevocable contribution to a donor-advised fund (DAF). Again, assuming you can itemize, you can deduct the full fair-market value of the asset, up to 30 percent of your adjusted gross income, and your contributions can be invested in mutual funds or similar vehicles. The contributions have the opportunity for growth, and distributions to the charity are tax-free. You can then decide, on your own timetable, which IRS-qualified charitable groups you would like to receive the money. Furthermore, if you donate stocks that have risen in value, you won't incur potential capital gains taxes that you would have when you eventually sold the stocks. These taxes can be considerable, especially if you’ve held the stocks for a long time. (You’ll want to consult with your tax advisor on how charitable gifts can affect your taxes, especially if you’re thinking of using a donor-advised fund.)

These charitable donation methods are not secrets, and they are available to many people – you don’t have to be wealthy to employ them. Yet, here’s an interesting statistic:

Those who work with a financial advisor on charitable strategies are more than three times as likely to donate non-cash assets such as stocks than those who contribute to charities but don’t work with an advisor, according to an August 2022 survey from financial services firm Edward Jones and Morning Consult, a global data intelligence company. These findings suggest that many more people could be taking advantage of tax-smart charitable giving moves – if only they had some help or guidance.

Also, by getting some professional financial assistance, you may find it easier to implement your charitable giving decisions within your overall financial strategy, which is designed to help you meet all your important long-term goals, such as achieving a comfortable retirement.

Your instinct to help support charitable groups is a worthy one – and by getting some help, you can turn this impulse into actions that may work to everyone’s benefit.

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Edward Jones, Member SIPC