Do you want to feel good about the donations you make to charity in the upcoming year but have no idea how to maximize your gift? The problem for many people is that there are countless ways to give, and there is no clearly defined strategy that stands head and shoulders above the rest. The best way to give is as unique as you are.
What are the best charitable giving strategies that you can implement in 2025?
This guide will walk you through four of our favorite ways to give to charities near and dear to the heart while making smarter financial decisions that benefit you both.
1. Use a Charitable Vehicle
When most people think about giving to charity, they initially assume that the only way to give is simply to write a check. However, donating cash might not be the best strategy for everyone. In fact, you can use a charitable vehicle such as a charitable remainder trust (CRT) or a donor-advised fund (DAF) that conveys more benefits for you.
A charitable remainder trust is an irrevocable trust where you donate cash and appreciated assets that you want to remove from your taxable estate. A beneficiary receives a source of income from the trust for a set term, the remainder of their life, or both. After the CRT payouts have ended, a charity will receive the balance in the trust (as long as it is a minimum of 10 percent of the initial trust value).
A donor-advised fund is another account that offers tax advantages in the here and now. Assets contributed to a DAF sit in the account until you suggest a grant to the charity of your choice. This allows you to fund projects and initiatives that truly matter to you and enables you to support more than one charity.
Talk with your investment advisor and estate planning professional to determine which charitable vehicle will help you accomplish your goals and maximize your tax deductions and other benefits.
2. Donate Appreciated Assets
This often goes hand in hand with choosing a charitable vehicle. If you set up a CRT, you have the option to fund it not only with cash but also with appreciated assets. This could include property you own like real estate, valuable collectibles, and fine art. However, it can also mean securities like stocks and bonds that might be too costly to sell outright.
Why is donating appreciated assets one of the best charitable giving strategies?
Suppose you hold a stock that has skyrocketed in value over the past few years. Maybe it was company stock that vested with years of loyal service to your employer. If you were to sell that stock on the market, you would be subject to capital gains tax on the profit you turned. That can eat into what you might earn and what that stock is ultimately worth.
On the other hand, you can contribute appreciated assets to a CRT and forgo capital gains tax on their sale. That allows you to maximize your gift by placing the full value of the asset into the trust without subtracting hefty taxes for capital gains.
3. Bunch Donations
Another opportunity to strategically give to charity is to bunch your donations together. For many people, it gets harder every year to hit the standard deduction threshold and surpass it to be able to itemize your return. Instead of missing out on the tax benefits of itemization, you can bunch several years of giving into a single tax year.
This savvy donating strategy hits the itemization threshold for the year while taking the standard deduction for the other years. You will have one year with excellent tax breaks while the others are as ordinary as your tax returns have been in the years to date.
4. Keep Documentation
Not sure if you are going to hit that itemization threshold for 2025? If you make a habit of giving to good causes or large nonprofits throughout the year, those gifts can certainly add up over the entire year. Most people will be unable to remember if they gave $200 to the animal shelter back in January, though they likely remember more sizable gifts.
Keeping documentation reminds you of what you gave and when so that your accountant no longer has to be flummoxed when filing your return. You know exactly what you gave and can justify the itemization of your tax return if you qualify. If you do happen to get audited by the IRS in the future, you’ll also have proof of your charitable donation.
Start a file in your cabinet where you add every receipt and keep appraisals of the fair market value of the assets you contributed to a charitable remainder trust or donor-advised fund. You will be glad to have the record when Uncle Sam comes knocking in April.
Charitable Giving Strategies with Magellan
Are you ready to embrace charitable giving and establish a financial legacy this year? Magellan is here to help you set up charitable remainder trusts while offering comprehensive financial, legal, estate, and tax planning services. We believe in making your giving into a one-stop shop so that you can focus your efforts on finding the perfect charity.
Reach out to us today to see if we could be the right fit to help you meet your charitable giving goals for 2025!
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
This material provided by Kevin Meaders was written by Axle Eight, a non-affiliate of Magellan Planning Group and Cetera Advisor Networks LLC.