Charitable Giving Strategies 

Jenny Handwerk |

Charitable Giving Strategies 

A charitable donation is when someone gives money or property to a nonprofit organization so that it can use it to further its objectives without expecting anything in return. In the United States, donors can deduct charitable contributions from their federal tax returns.

The IRS permits taxpayers to write off gifts of money and other assets made to recognized charities. Donations to charities must be itemized to be tax deductible. Donations up to 60% of taxpayers' adjusted gross incomes are deductible.

The types of gifts that can be made and the kinds of organizations that can accept them are limited by the Internal Revenue Service (IRS). The receiving charity must be a qualified organization in the eyes of the IRS in order for donations to be deducted.

What is a Charitable Giving Strategy

You'll make some very conscious donations to help the topics and groups that are important to you. A strategic giving strategy is a basic, high-level structure that allows you to connect your most important beliefs to your charitable giving. 

Using your beliefs as a guide, you may readily determine where to focus your philanthropic giving throughout the year. It also makes it easy to decide when those reactive opportunities present themselves. To keep on track, you can carefully analyze each opportunity and fit it into your plan.

How To Create a Right Charitable Giving Strategy

Define Your Objectives

Decide what you want to accomplish with your donation by outlining your goals and objectives. These should be unique to you and reflect your values, interests, and beliefs. They will assist you in developing a framework for measuring achievement.

Your goals should be focused on what you hope to improve as a result of your charity; goals are declarations of intent. Consider this the 'what'. Your objectives are the activities that will result in the measurable outcomes of your goals. 

Determine how much you wish to contribute and how


After you've evaluated your financial plan and established an overall budget, consider how you want to divide your gifts this year. There are a couple of strategic approaches you could take.

The 80/20 rule states that you should contribute 80% of your giving budget to causes and organizations you passionately connect with and leave 20% for reactive giving. You can adjust this ratio if you link reactive giving back to your most essential values, such as developing community or reinforcing ties through donating. However, the goal is to encourage the majority to give proactively rather than reactively so that you can have a more significant impact on the issues that are most important to you.

Select the right asset to give.


While the markets have become more volatile recently, many investors' assets have grown due to long-term gains over the last decade. Donating long-term appreciated stock to a charity, notably those that offer a donor-advised fund program, may increase your charitable tax deduction and result in a more significant donation than selling the assets and donating the after-tax gains.


Include giving in your financial plan.


While many people give generously, they do not always consider the big picture. Harris suggests evaluating your giving from your perspective of yours. Giving is sometimes overlooked as a component of wealth planning, yet it can be important to a family's overall financial strategy. 

Incorporating charitable giving into your financial planning will guarantee that you address any questions regarding whether charitable giving can be included in other major financial events to help reduce your tax burden.

Examine the financial health of each philanthropic organization.


Investigate how each donation is used and what percentage of the money is directed directly to the charity. Fundraising and administrative expenses aid the charity's work, but you should be wary of groups with excessive overhead costs. Request a copy of the charity's most recent annual report and the Internal Revenue Service (IRS). These documents detail the charity's budget allocation and financial plans and can offer you insight into how your money is used to achieve the desired impact.


Make a transfer of assets in your will.


In your will, you can name a charity or foundation as a beneficiary and spend up to 100% of the tax credit in the year of death, meaning a 33% increase in the amount of credits that could normally be used in a given year during your lifetime. A will bequest may leave an enduring legacy. A registered plan might also be named to benefit a charity.

While there is no "one-size-fits-all" charitable giving approach, deciding between cash, appreciated stocks, and qualifying charitable distributions will be influenced by various personal criteria, such as your age, portfolio, and how much you are willing or able to contribute.

Charitable giving can quickly become complicated. Make sure you have the proper specialist on your side to guide you; we can assist you in developing the finest approach.