9 Tips for Your Charitable Giving Plans this Tax Season

Practicing tzedakah (charitable giving) not only helps support causes you care about but can also provide you with tax benefits, a relevant topic ahead of April 15.

If you're strategic about your donations, you can maximize your tax savings while making a meaningful impact. As always, thank you for your generosity to help others near and far.

Here are 9 Tips for Your Charitable Giving Plans this Tax Season:

Donate to Qualified Charities
1. Ensure the organization is a registered 501(c)(3) nonprofit in order to gain tax benefits as contributions to other IRS designations may not be tax-deductible.
2. When you open a donor advised fund (DAF; see bullet 2 below), the JCF vets each organization you choose to support to ensure that it's a qualified nonprofit, and we will provide guidance if an organization is not. You can also use the IRS’s Tax Exempt Organization Search tool to verify eligibility.
3. In addition to vetting nonprofits, if you have a DAF with the JCF, our team can assist you if you're looking to find new charities or particular causes to support.
Use a Donor-Advised Fund (DAF) to Assist Your Charitable Giving Plans
1. Contribute to a DAF to receive a immediate tax benefits for the current year.
2. Distribute funds to charities over time while allowing investments to grow tax-free.
3. With April 15th in mind, when you use a DAF, you no longer will need to track each donation you make to charity for your tax return; instead, you have one, centralized account, and the JCF provides you with the donation paperwork for tax record purposes.
Itemize Your Deductions
1. To claim charitable contributions, you must itemize instead of taking the standard deduction when completing your tax return each year.
2. Compare whether itemizing or taking the standard deduction provides a greater tax benefit. Note that the best choice for most donors is to take the standard deduction, but you can still be charitable and gain tax benefits, read on...
Donate Appreciated Assets
1. Consider gifting stocks, mutual funds, or other appreciated assets that you have held for over one year, instead of cash.
2. You avoid capital gains tax and can deduct the asset’s fair market value.
3. Donating appreciated assets into a DAF with the JCF is a particularly smart option since many nonprofits are not equipped to accept non-cash donations, plus, you may want to divide up your proceeds to multiple charities, and the JCF's online DAF platform makes it much easier to do recommend grants to charitable organizations, compared to having to coordinate multiple asset donation transactions.
Bunch Your Donations
1. Combine multiple years' worth of donations into a single tax year, particularly into a DAF, to exceed the standard deduction threshold (consult with your trusted tax advisor to determine the amount that you would need to donate to gain the most benefit).
2. This can help you maximize your itemized deductions in high-income years and then distribute grants from your DAF to charitable causes of your choice at any future time.
Qualified Charitable Distributions (QCDs) for Retirees
1. If you're 70½ or older, donate directly from your IRA to a charity.
2. This can satisfy Required Minimum Distributions (RMDs) without increasing your taxable income.
3. Up to $108,000 can be donated as a QCD per IRA owner.
4. Note: By IRS regulations, a QCD cannot go into a DAF; however, it is a wonderful option to build an endowment fund to ensure that your charitable support for your favorite cause(s) will continue annually for many generations.
Keep Proper Documentation
1. Retain receipts and acknowledgment letters from charities. Generally, seven years is the recommended amount of time to hold these records in case of an audit.
2. For donations over $250, obtain a written statement from the nonprofit.
Volunteer Expenses Can Be Deductible
1. You can deduct unreimbursed expenses related to volunteering, such as travel costs.
2. Keep records of mileage, lodging, and other necessary expenses.
Consider Estate Planning Strategies
1. Charitable remainder trusts (CRTs) or gifts in your will can provide tax advantages.
2. This allows you to support charities while potentially reducing estate taxes.

By planning your charitable contributions wisely, you can make a difference while optimizing your tax benefits. Always consult with a tax professional to ensure you’re taking full advantage of available deductions and complying with IRS regulations. While the JCF cannot provide estate, legal, or tax advice, we welcome the chance to work with you and your advisor to maximize your charitable giving.

To learn more, please contact JCF Executive Director David Snyder at 856-673-2571 or dsnyder@jfedsnj.org.