How To Integrate Charitable Giving Into Your Financial Plan
With the holiday season in full swing, and Black Friday just around the corner, this is also the time of year when many people make an effort to give to charity. Now more than ever, those who want to make charitable donations are giving to organizations that align with their personal values, and it helps to understand how giving to charity can impact your financial plan.
For those who either give regularly, or are considering a charitable donation, there are three important questions to answer before writing a check:
- How much should you give?
- How do you want to give?
- Are there financial benefits to giving?
Giving to charity for no other reason than to try and make a difference is both commendable and worthwhile. However, if you want to make charity a regular part of your spending, it helps to have a plan in place to make that happen.
How Much Should You Give?
If charitable giving is important to you, the best thing you can do is to budget for it the same way you would any other financial goal. The act of giving is the most important thing, the amount you are able to give should be based (mostly) on what you can comfortably afford.
Once you’ve come up with an amount that works for you, think about when you want to make your donation. While more than half of nonprofits report they get most of their funding between October and December, there’s no reason you can’t give in smaller increments year-round.
Many organizations accept recurring monthly donations via credit card, PayPal, or bank transfer. Setting up regular payments or donating periodically throughout the year is a great way to make your giving more organized and easier to integrate into your budget.
How Do You Want To Give?
Many people assume that the only (or best) way to give to charity is with cash, but there are several other options available that may make more sense for you, depending on your financial situation. For example:
Stock: You can actually donate shares of stock you own to charity. If you’ve held that stock for more than a year, you can get a tax deduction on the fair market value of your shares.
Personal Property: Many charities accept donations in the form of clothes, computers, even vehicles if you have an old car that you’re willing to give away.
One thing to remember is that if you decide to itemize your charitable contributions on your tax returns, the donations will be based on the fair market value – meaning what the item is worth at the time you donate it, not the original price.
Donor-Advised Funds: If you want to make a larger donation ($5,000-$10,000 or more), you may want to consider a donor-advised fund. With a DAF, your money is invested for charitable purposes, but you can decided when and where the money goes at a later date.
For more information about starting a donor-advised fund, please contact us for a free consultation.
Are There Financial Benefits To Giving?
The only way to write off charitable donations on your taxes is if you itemize your deductions. Keep in mind however that under the new tax law, the standard deduction (non-itemized) for individuals is now $12,000, or $24,000 for married couples.
If you think your itemized deductions would come close to the standard deduction amount, you can use your charitable donations to help get you over the limit.
Most importantly, regardless of the amount and type of giving you do, your gifts are only tax deductible if you give to a 501(c)(3) charity or religious organization. You’ll also need a receipt or record of your gifts from the organization if you’re planning to itemize your tax deductions.
If you don’t have a record of your donation, and the IRS does an audit, you’ll be in hot water.
Working With A Professional
If you’re interested in making charity part of your personal financial plan, but aren’t sure how to get started or need help making a budget, consider working with an experienced financial planner.
At Miles Brown Asset Management, we can help you create a plan that includes personal savings goals, retirement planning, and charitable giving. Give us a call or schedule a free consultation today.
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