7 Ways to Give Back This Holiday Season

As we gather with loved ones this holiday season, we’re reminded of the many reasons to be grateful—family, health, and the chance to make a difference in the lives of others. The holiday season is not only a time for reflection but also an opportunity to turn our gratitude into action. Charitable giving has long been a part of this season, and with a bit of planning, you can make your contributions even more impactful—for your favorite causes and your financial goals.

Several years ago I wrote a similar article on charitable giving and thought this would be a great time to update and expand on the strategies outlined back then.

1. Appreciated Securities: Transforming Growth into Generosity

When you think of giving, you might imagine writing a check or donating cash. But did you know that donating stocks, mutual funds, or other investments with long-term gains can amplify your impact?

• Why It’s Smart: Investments that have appreciated come with built-in tax liabilities in the form of capital gains. When you sell these assets, you pay taxes on their growth. However, if you donate them instead, you avoid the capital gains tax entirely and can deduct their full fair market value from your taxable income. This means the charity gets the full value of your contribution, and you get a bigger tax break. It’s a win for everyone.
• Example: Imagine you purchased a stock for $1,000 that’s now worth $5,000. If you sold it, you’d pay capital gains tax on the $4,000 profit. But by donating the stock, you avoid taxes and provide the charity with the full $5,000 value. Your donation goes further, and your taxable income is reduced.
• How to Start: Reach out to your chosen charity to confirm they accept securities donations. Many organizations have specific processes or accounts set up to handle these gifts. Be mindful of timing, as it can take a few days to process the transfer, especially toward year-end.

2. Qualified Charitable Distributions (QCDs): Streamlining Generosity in Retirement

For retirees required to take distributions from their IRAs, Qualified Charitable Distributions (QCDs) provide an excellent way to give back while minimizing your tax bill. This option is particularly appealing for those aged 73 and older, as it turns a mandatory obligation into a meaningful contribution but can be initiated as early as age 70 ½.

• How It Works: Each year, retirees are required to withdraw a certain amount from their traditional IRAs, known as a Required Minimum Distribution (RMD). These withdrawals are taxed as income. However, a QCD allows you to donate up to $100,000 directly from your IRA to a qualified charity, bypassing income taxes on the distribution.
• Tax Benefits: By directing your RMD to charity, you reduce your Adjusted Gross Income (AGI). This can lower your tax liability and potentially reduce other costs tied to AGI, such as Medicare premiums or the taxation of Social Security benefits.
• The Bigger Picture: QCDs are an ideal option for those who don’t need their RMD for living expenses but still want to make an impact. They simplify giving, reduce your taxable income, and ensure your hard-earned savings are put to good use.

3. Donor-Advised Funds (DAFs): A Giving Account for the Thoughtful Planner

If flexibility is important in your charitable giving, Donor-Advised Funds (DAFs) are a versatile and tax-efficient option. Think of a DAF as your personal giving account—one that allows you to donate now and decide later how and when to distribute those funds to charities.

• How It Works: You contribute to a DAF in the form of cash, stocks, or other assets. These contributions are tax-deductible in the year they’re made, even if you choose to distribute the funds over several years. The assets within the DAF can also grow tax-free, allowing for greater giving potential.
• When to Use It: DAFs are particularly useful in high-income years or when you want to “bunch” donations. By making a significant contribution to the DAF in one year, you can exceed the standard deduction threshold, allowing you to itemize and enjoy greater tax savings. In subsequent years, you can continue directing charitable gifts without additional contributions.
• Family Engagement: DAFs are also a fantastic tool for fostering a culture of giving within your family. You can involve loved ones in deciding which charities to support, turning your DAF into a platform for shared philanthropy and lasting impact.

4. The Power of Matching Gifts: Double Your Impact

Many employers offer matching gift programs that can significantly amplify your charitable contributions. These programs often match donations dollar-for-dollar, effectively doubling the support your chosen charities receive.

• How to Leverage Matching Gifts: Check with your employer to see if they offer a matching program. Some companies have online portals where you can submit proof of your donation, while others require a simple form. Employers typically outline eligible charities and contribution limits, so be sure to review the guidelines.
• Think Strategically: Timing your donations to align with your employer’s calendar year deadlines ensures you don’t miss out on a match. Additionally, consider spreading your contributions to maximize matching opportunities if there are annual caps.
• Why It Matters: Matching gifts not only increases the financial support charities receive but also encourages broader participation in giving within your workplace. It’s a chance to amplify your impact while fostering a culture of generosity.

5. Charitable Trusts: Giving with a Legacy in Mind

For those looking to integrate philanthropy into their estate planning, charitable trusts can provide a long-term impact while offering significant tax advantages.

• Types of Trusts:
  • Charitable Remainder Trusts (CRTs): These allow you to provide income to yourself or beneficiaries for a set period, with the remainder of the trust’s assets going to a charity. CRTs offer income tax deductions and the potential to avoid capital gains taxes on donated assets.
  • Charitable Lead Trusts (CLTs): With this option, charities receive income from the trust for a designated period, and the remaining assets are passed on to your beneficiaries, potentially reducing estate taxes.
• Who Should Consider This: Charitable trusts are ideal for individuals with significant assets who want to balance philanthropy with financial security for their heirs. These trusts allow you to support causes you’re passionate about while preserving your legacy.
• How to Get Started: Work with a financial advisor and estate planning attorney to structure a trust that aligns with your goals. They’ll help you navigate the legal and tax complexities while ensuring your vision is carried out.

6. Volunteering: Giving Time and Making an Impact

Charitable giving doesn’t always have to involve money. Donating your time and skills can be just as impactful, especially for organizations that rely on volunteers to fulfill their missions.

• Why Time Matters: Nonprofits often operate on limited budgets and depend heavily on volunteers to execute programs, organize events, or provide hands-on support. Your time can directly impact your ability to serve the community.
• How to Get Involved: Reach out to local charities, schools, food banks, or shelters to ask about volunteer opportunities. Many organizations also post needs on their websites or social media platforms.
• Enhancing Your Impact: Combine volunteering with financial contributions. For example, you might donate to a charity you volunteer with, allowing you to experience firsthand how your financial support furthers their mission.

7. Planned Giving: Incorporating Philanthropy Into Your Estate Plan

For those looking to make a long-lasting impact, planned giving allows you to designate charitable donations in your will or estate plan. This ensures your legacy of generosity continues well into the future.

• How It Works: You can leave a percentage of your estate, a specific dollar amount, or even assets like real estate or life insurance policies to a charity of your choice. These gifts are typically tax-deductible, reducing the estate taxes your heirs may owe.
• Why Consider Planned Giving: It allows you to align your estate with your values, ensuring that your wealth supports causes that matter most to you. Additionally, planned giving doesn’t affect your current financial situation, as the gift is executed after your lifetime.
• Making It Personal: Many charities allow planned giving donors to create dedicated funds or scholarships in their name, offering a lasting and meaningful tribute to your life’s passions.

Making This Holiday Count

The holidays are a time to reflect on our lives and to share that gratitude with others. By using strategies like appreciated securities, QCDs, or DAFs, you can make your giving go further supporting the organizations and causes that matter most to you while achieving financial efficiency.

Whether you’re exploring these options for the first time or looking to refine your approach, consulting with a financial advisor, tax professional, or legal expert is key. With the right guidance, you can turn your holiday generosity into a meaningful, long-lasting impact—for your community and yourself.

The content provided is for educational and informational purposes only and should not be considered as a basis for making any investment or financial decisions. Strategic Financial Services provides personalized advice tailored to the specific needs of each client. This material is not intended to offer legal or tax advice; please consult with a qualified tax professional or attorney for such services.

All investments involve risk, including the possible loss of principal. Strategic Financial Services is a registered investment advisor. Registration does not imply a specific level of expertise or training.