4 Tax-Efficient Strategies to Boost Year-End Giving

Dec. 2, 2023

In the spirit of gift-giving season being in full swing, now is the time to jumpstart your organization’s year-end fundraising plan. The season starts on Giving Tuesday, and to help keep this momentum going, we’re sharing several tax-advantaged opportunities related to charitable giving that your organization can share (and market!) to donors to help encourage their support.

1. Donor Advised Fund

A donor advised account is a private fund opened by an individual specifically for charitable giving. By opening a donor advised fund, donors can take the entire charitable deduction on the year they fund the account, regardless of when the money is eventually transferred to an organization. Donations can be made to multiple organizations at the discretion of the donor.

By utilizing this type of fund, it allows donors to bundle all their donations into one account, for one tax deduction, rather than a series of smaller donations.

2. Qualified Charitable Distributions 

A required minimum distribution (RMD) is a type of withdrawal that individuals must take from certain retirement accounts once they turn 73. One way to satisfy the RMD requirement and make a charitable gift is through a qualified charitable distribution (QCD). Donors over age 70 ½ can donate up to $100,000 from their IRAs (Note: 401ks are not eligible) and give the money directly to a charity, bypassing the tax liability of an IRA withdrawal and reducing their adjusted gross income. (In 2024, the amount will increase to $105,000).

3. Appreciated Assets

One of the most tax-efficient ways to give is by donating appreciated assets. Types of assets include stocks, bonds, or other securities. Donors who itemize on their taxes will receive a tax deduction for the value of their gift (limited to 30% of their adjusted gross income), while also avoiding any capital gains embedded in the asset. This might be an attractive tactic for donors with unusually high income or unrealized capital gains this year.

4. Sell investments that are down, donate the cash

While this last one is dependent on the market environment, it’s a unique spin on tax strategy by seeing losses as an avenue for donations. Normally, donating assets directly allows for a deduction that gets capped at 30% of your AGI.

By selling assets that are down, you realize the loss first. This will offset any capital gains or reduce your ordinary income by $3,000. This lowers your AGI before your charitable contribution deductions even come into play. Then, by donating the cash, you are allowed a deduction that is capped at 60% of your AGI (as opposed to the 30% if you directly donated a stock).

There are several tactics and strategies to make donations and charitable giving worthwhile for donors who have found organizations and causes they care deeply about. Depending on their goals and plan, one of these four tax-efficient strategies may make sense for their financial situation – share them with your donors to find out!

Fundraising 101: A Guidebook for Fundraising & Development Professionals

For more, download our Fundraising 101 Guidebook, which includes additional strategies your organization may want to consider, tips and tricks, and more.

Download now

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