Holiday Giving with a Tax-Smart Twist: Maximizing Your Impact This Season
As the holiday season unfolds, it’s natural to feel inspired by the spirit of giving. Whether you’re donating to a favorite charity, supporting a local cause, or contributing your time to a community initiative, this time of year is all about spreading joy and making a difference.
But did you know your generosity can also provide significant tax benefits when you itemize your deductions? By planning your charitable contributions strategically, you can maximize their impact—not only for the causes you care about but also for your financial well-being.
Here are some tips to help you give wisely and save smart this holiday season:
1. Explore Tax-Smart Giving Options
Donate Appreciated Assets
If you’ve owned stocks, mutual funds, or other investments for more than a year and they’ve increased in value, consider donating them instead of cash. By doing so, you can avoid paying capital gains taxes on the appreciation while also claiming a charitable deduction for the full fair market value.
Bundle Your Donations
If your total charitable giving doesn’t exceed the standard deduction, consider “bunching” donations. This means combining multiple years’ worth of contributions into one year to maximize your deduction. In alternate years, you can take the standard deduction, creating a rhythm that maximizes your tax savings.
Leverage Donor-Advised Funds
A donor-advised fund (DAF) allows you to contribute a lump sum to a fund, claim the deduction in the year of the contribution, and distribute funds to charities over time. It’s a great way to simplify giving while maintaining flexibility.
Charitable Giving for Businesses
Small businesses can align charitable contributions with their corporate values while reducing taxable income. Whether it’s cash, goods, or even sponsorships, business giving can make a lasting impression on both your community and your bottom line.
2. Stay Organized for Tax Time
To ensure your contributions qualify for deductions:
Confirm the Charity’s Status: Make sure the organization is IRS-qualified. You can verify this using the IRS’s Tax Exempt Organization Search tool. Link: https://apps.irs.gov/app/eos/
Keep Documentation: For cash donations over $250, you’ll need a written acknowledgment from the charity. For non-cash contributions, receipts and additional forms may be required.
Note the Deadline: Contributions must be made by December 31 to count toward this year’s taxes.
3. Give More Money
The holidays are about more than financial gifts. If your budget is tight, consider donating your time, skills, or goods. Volunteering at a local nonprofit or participating in a community food drive can be just as impactful. While time isn’t tax-deductible, associated costs like mileage or supplies you purchase for a charity might be.
Why It Pays to Plan
Thoughtful giving not only amplifies the joy of the holiday season but also helps you align your financial goals with your personal values. Whether you’re giving as an individual or a small business, taking a tax-smart approach ensures that your generosity goes even further.
Need Help with Year-End Planning
At Carlson Hearne CPA, we’re here to make your financial life easier. Our team can help you create a personalized charitable giving plan, review your tax situation, and ensure you’re taking advantage of all available deductions.
Let’s work together to make this holiday season a time of meaningful impact and smart financial decisions. Contact us today to get started!
Happy Holidays from Our Team to Yours!
From all of us at Carlson Hearne CPA, we wish you a joyful holiday season filled with peace, generosity, and good cheer. Thank you for trusting us with your financial needs—we look forward to serving you in the new year!