NORFOLK, Va. — The end of the year is also known as the giving season.
People dig deeper into their pockets to buy loved ones gifts and also donate to charity. While getting gifts for your sibling may not pay off, your charitable donation could, so News 3 Problem Solver Erin Miller looked into how you can maximize the money.
Matt Fleming, CFP, with Vanguard Personal Advisor Services said charitable giving is the framework of three different things:
- When you give — consider the timing
- What you are giving — is it cash, a check, or appreciated stock?
- How you are giving — is it a one-time gift or is it recurring?
"I think the three primary factors that almost all clients should be considering is cash versus appreciated security," said Fleming.
For the past two years, taxpayers who claimed their standard deduction were still able to get a deduction for Qualifying Charitable Donations, but this year that no longer exists. If you want a tax benefit for anything you've given in 2022, you must itemize.
Fleming said your write-offs depend on what you're donating, like cash vs. appreciated security, for example.
"If they're given an appreciated security, they can oftentimes get a very similar tax deduction benefit at the market value of the security," he said. "The other benefit is if they have a large embedded capital gain on that position, they can, sort of, get that out of their portfolio to the charity without incurring a capital gain to them personally — and that can also sometimes have a good effect."
Fleming said if you're over 70.5 years old, consider giving from a retirement account.
"Most of the time, when we take a distribution from an IRA, the IRS treats that as ordinary income to us, but if you do that in the form of a Qualified Charitable Distribution directly from the IRA, to a charity, you can be absolved of that federal tax impact on that distribution, which can be a pretty sizable benefit for a lot of folks," he said.
To see qualified charities, click here to access the Tax-Exempt Organization Search Tool created by the IRS. Reaching out to a financial professional can also be helpful.
If you have a consumer tip or a story you want the News 3 Problem Solvers to look into, email problemsolvers@wtkr.com.
