‘Tis the season of giving, and savvy donors know it’s not just who you give to but how you do it.

Year-end philanthropy offers more than goodwill; it’s a strategic move that pairs heartfelt effectiveness with substantial tax savings. You can maximize your contributions and financial benefits by carefully structuring and timing your gifts.

Gifting an appreciated asset, such as a stock held for more than a year, to a qualified charity can be a game-changer. That’s because you’ll avoid paying capital gains tax on the asset’s growth, explained Frank Aguilera, senior wealth advisor at Naples-headquartered Aviance Capital Partners. The charity can then sell the stock without incurring taxes because it’s tax-exempt.

“You’re achieving the same goal where you’re giving the charity money, but you’re doing it in a way that’s more tax-beneficial for you,” Aguilera said. “You’re keeping your liquidity intact by preserving your cash.”

If you’re aged 70.5 or older, Qualified Charitable Distributions offer another option.

Frank Aguilera

You can donate up to $100,000 annually directly from your IRA to a charity. This move not only excludes the amount from your taxable income, but also counts toward satisfying Required Minimum Distributions for those 73 and older.

“Once you turn 70-and-a-half, the IRS allows you to gift a portion of your retirement account, your IRA, directly to a charity. By doing so, it’s a non-taxable distribution,” Aguilera said.

If estate planning is part of your year-end financial strategy, note that it’s more tax-efficient to gift to a tax-exempt charity from an IRA account than to an heir because distributions from inherited IRAs are subject to income tax.

“If a charity is the beneficiary of an account, they don’t have to pay taxes on it. This then frees up other accounts to give to heirs,” Aguilera said.

With the current standard deduction up about 5% compared to 2023, according to the IRS and adjusted for inflation, taxpayers may have a harder time itemizing deductions and, therefore, might not see a direct tax benefit from their charitable contributions.

Donor-Advised Funds can help with this hurdle.

By contributing a large sum to a DAF in one tax year, you can surpass the standard deduction, unlock tax benefits and distribute charitable gifts from the account in the future.

“From the Donor-Advised Fund, you can gift to a charity over a certain period of time,” Aguilera said. “So, instead of giving one big lump sum to a charity all at once, you do the Donor-Advised Fund, and you’re basically funding the next few years of charitable giving.”

A financial planner can give more nuanced insight based on your unique financial circumstances and goals. However, no matter your net worth, aligning your giving with strategies that maximize your effectiveness while minimizing your tax burden will make your generosity go further.

For you, your family and the causes you care about most.

This story was originally published in The Naples Press.