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To Whom Much is Given: Financially Smart Ways to Give Back

By Trudy R. Turner, CPA/PFS, CFP®

When I attended college, many of my fellow Black students were first-generation college attendees. They came from families that had sacrificed much to give their children the education and opportunities that they were never able to experience themselves. These families and their culture of self-sacrifice taught their children the importance of giving back – a responsibility to send the elevator back down once they achieved a certain level of success.

Similarly, as my parents sacrificed to give me opportunities, I feel the same responsibility to my son and others in my community who may not have the same opportunities that I was given.

Volunteering in my community, serving the underserved and charitable giving have become consistent ways I use my time, talent and treasure to give back. And as a financial advisor, I have a unique skill set to help clients, family and friends give back in financially smart ways.

COVID-19 has financially destabilized so many families – and in particular, families of color. For those who have been more fortunate and wish to give back, there are efficient and effective ways to do so that can be a blessing to both the giver and receiver.

4 Potential Ways to Maximize Your Giving

If you’re just starting out in your career, you may not have a lot of funds to dedicate to charity. And that’s okay! While you may find yourself giving back more with your time and talent, there are ways to maximize even small donations of your treasure for your cherished causes.

Whether you’re in a financial position to give a little or a lot – there are a few potential ways to maximize your giving. Many of the examples I will provide come with tax implications. And that’s because giving to charity is incentivized by certain deductions in the U.S. tax code.

Keep in Mind: IRS rules regarding charitable contributions and tax deductions can be complex. While I can go over the basics, it’s always a good idea to consult with your tax advisor to understand what rules may apply to you and your specific financial situation. You can also find more information about charitable contributions in IRS Publication 526.

1. Charitable Deduction Under the CARES Act

Beginning in 2020, the CARES Act allows taxpayers who use the standard deduction to deduct up to $300 of cash donations to charitable causes.

Typically, you can only deduct charitable contributions if you itemize your tax deductions (which is generally used by taxpayers with significant mortgage interest, property taxes, medical expenses and charitable donations).

This new law – inspired by the hardships of COVID-19 - allows even those who do not itemize to claim a deduction for their generosity.

2. Employer Matching for Charitable Donations

If you’re fortunate enough to work for an employer who matches employee charitable donations, you might want to explore this employee benefit as an option to help you maximize your giving. After all, you may not want to leave valuable “free” money on the table when it can benefit your cherished causes.

Corporate matching gift programs vary from company to company. Some employees are able to double or even triple their gifts to qualified organizations with a little help from the company they work for. While some firms may not match donations to religious organizations, many can match donations to health, welfare and educational organizations.

3. Donor-Advised Funds

As your career (and charitable giving) becomes more established, you may wish to give more generously to causes and become more involved with your giving process.

Establishing a charitable-giving account in your community, city or financial services foundation can introduce you to nonprofits in the foundation’s network that meet your charitable requirements or even help you with the timing or anonymity of your gifts.

Donor-advised funds are a common type of charitable account established at a foundation or public charity. These accounts can be an efficient and effective way for donors to give to charity, even if they have yet to identify the specific charitable organizations where they want that money to go.

Many major financial institutions offer and administer donor-advised accounts through their own public charity. Generally, once money is placed in a donor-advised fund, the donor may receive a charitable deduction for the amount contributed in that tax year (some restrictions apply).

The money in the donor-advised fund must eventually be given to qualified charitable organizations. But in the meantime, the money can be invested to grow and saved for future year donations.

Another potentially valuable feature of a donor-advised fund is the ability to send funds immediately or in the future to charitable entities.

For example, if your local hospital has advertised a five-year capital campaign for cancer research, you could donate to your donor-advised fund for a few years to build up a meaningful gift you want to donate at the end of the campaign.

Using a donor-advised fund can also allow you to give funds anonymously.

While many donors may want the recognition of being a named donor, others often wish to give to causes quietly without fanfare. Donor-advised funds are often able to direct your money to causes without revealing the original donor’s identity.

Good to Know: While donor-advised funds can help facilitate charitable giving, there are potential drawbacks to keep in mind. For example, once you make a donation to the fund, it’s irrevocable – you can’t ask for the money back. Many donor-advised fund providers also have a minimum donation requirement for opening an account, which could be as high as $25,000 (or more). It’s a good idea to look at the administrative fees involved, too. High fees could reduce the amount of your original donation.

4. Beyond Cash Gifts

Over time, your giving may grow significantly, where you wish to leave a legacy of giving for your family or make a game-changing gift to one of your passionate causes.

As the amounts of your gifts grow, cash often becomes an inefficient way to donate charitably. In some cases, it’s often smarter to give assets – financial or otherwise – directly to the organizations or your donor-advised fund.

Donating Financial Assets

You can generally deduct the fair market value of appreciated long-term capital assets (like stocks, bonds and mutual funds) that you’ve donated directly to charity. Long-term means you’ve held them for more than a year.

Not only are you allowed to deduct the value of the security, but the gain that you had in the asset becomes tax-free (in other words, you don’t have to report it in your taxable income).

Typically, to qualify for this deduction, you must donate the asset directly to the charitable entity or your donor-advised fund – rather than selling it for cash and donating the proceeds.

Donating Non-Financial Assets

Lastly, even donating non-financial (or noncash) assets could help you claim a tax deduction. Non-financial assets may include property related to a charity’s mission. Examples may include artwork to a museum or cars donated to an auto mechanics college. Such gifts can provide great value to an organization.

Keep in mind that you may need to obtain an appraisal to claim a tax deduction for gifts of noncash assets in excess of certain value thresholds.

The Bottom Line

As I see it, one of the great joys I can share with clients and others that I care about is the ability to bless others – as we have been blessed. We can do so by giving generously to causes and organizations that reflect our values, dreams and aspirations. Giving back in financial smart ways not only allows us to be great stewards of the treasure we have been given, but it also provides us the opportunity to share our blessings with others.

PFM Trudy Turner Web

Trudy R. Turner, CPA/PFS, CFP®

United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.

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