Charitable giving strategies are important especially to baby boomers once they withdraw from their retirement funds.
Learn your charitable giving strategies in order not to lose money. (Photo: Smith & Wilkinson)
Charitable Giving Strategies
Charitable giving strategies were forgotten and charitable giving in the US has declined, with a 3.4% drop in 2022 (10.5% adjusted for inflation) to just under $500 billion. Individual giving experienced a significant decline of 6.4% (or 13.4% when adjusted for inflation), alongside the decrease in charitable giving strategies.
Charitable giving strategies have been overlooked due to various factors such as a turbulent stock market and the Tax Cuts and Jobs Act of 2017, resulting in a decrease in donations. These charitable giving strategies and the drop led to fewer people itemizing deductions for charitable giving due to the standard deduction.
A potential increase in generous giving and the use of charitable giving strategies is possible for baby boomers who need to withdraw money from their retirement accounts, which adds up to about $14 trillion. Unfortunately, the tax code discourages using these funds for charitable giving because the withdrawals are taxed as income, and donations must be made with after-tax income without significant benefit from the charitable deduction.
According to a published article by The Messenger, the exception for using charitable giving strategies is for personal IRA accounts. Such exception of using charitable giving strategies is where individuals can make “qualified charitable distributions” directly to charities and avoid being taxed on the income.
Tax And Legal Considerations
In a published article by WCNC, giving money to charitable causes, such as supporting those affected by the Israel-Hamas conflict, can be confusing. When donating, it is important to make sure that it goes to trustworthy individuals or organizations. Furthermore, there are also tax and legal factors that you should be aware of and consider.
To qualify for a tax deduction, donations should be made to qualified organizations such as churches, synagogues, temples, mosques, nonprofits, schools, and hospitals. The IRS provides a fact-checking tool on their website where you can verify if an organization is properly registered for tax exemption. Note that local churches may not be listed on this tool.
It is also important to remember that while you can donate to international causes, the organization must be based in the U.S. for you to receive a tax deduction. Donating to charities or nonprofits based outside the country will not provide any tax benefits.
