Year-End Charitable Giving Thoughts

The best time for charitable gifting depends on a variety of factors, including your financial goals, tax planning considerations, and the timing of charitable events or initiatives.  With that being said, it seems like this time of year is the most popular to give to charity.  I know here at Suncoast Prosperity Advisors, we receive many inquiries about giving towards the end of every year.   Here’s a breakdown of the most common scenarios when charitable gifting can be particularly advantageous:

1. End of the Year (Tax Planning)

Tax Deductions for the Current Year: One of the most common times for charitable giving is at the end of the calendar year. Charitable contributions made by December 31st can count toward your tax deductions for that year.

Maximizing Deductions: If you’re close to a higher tax bracket or want to reduce taxable income, making a charitable contribution before year-end can possibly help lower your tax bill. For example, cash donations or gifts of appreciated stocks can be deducted against your income, potentially lowering your overall taxable income.

Donor-Advised Funds (DAFs): Contributions to donor-advised funds must also be made by December 31st to count as a deduction for that tax year, even if the actual grants to charities happen in a future year.

Tip: If you want to take advantage of the tax benefits in the current year, be sure to check with your charity of choice to confirm they can process donations in time before December 31st.

2. During Market Conditions for Appreciated Assets

When Stocks or Investments Have Appreciated: If you own appreciated stocks, bonds, or other assets, gifting them directly to a charity can be a particularly effective strategy. You avoid paying capital gains tax on appreciation, and the charity receives the full value of the donation.

3. When You’re Planning an Estate or Legacy Gift

Incorporating Charitable Giving into Estate Planning: If you are planning your estate or making end-of-life decisions, charitable gifting can be a central part of that strategy. Charitable bequests or contributions made through a trust can reduce the size of your taxable estate, potentially lowering estate taxes.

Charitable Remainder Trusts (CRT) or Charitable Lead Trusts (CLT): These types of trusts can be structured to provide income for yourself or your beneficiaries, with the remainder going to charity. If you’re already planning to make gifts or distributions from your estate, incorporating a charitable trust could maximize tax efficiency.

4. Before Major Financial Changes

Large Bonus or Sale of Assets: If you’re anticipating a major financial event, such as receiving a large bonus, selling a business, or selling real estate, it can be a good time to make charitable donations. A large increase in your income or capital gains could push you into a higher tax bracket, and charitable giving can help offset the higher taxes.

Liquidity Events (Selling a Business or Property): When you sell an asset such as a business or real estate, you may face a large capital gains tax bill. Donations to a charity or Donor-Advised Fund can reduce your tax liability while providing support to a cause you care about.

5. Giving Goals (Birthdays, Anniversaries, Holidays)

Personal Milestones: If you’re celebrating a personal milestone like a birthday, wedding anniversary, or another special event, it’s an excellent time to think about charitable gifting. You could make a donation to a cause that’s meaningful to you or ask others to contribute in lieu of gifts.

Holidays and Giving Seasons: The holiday season, particularly around Thanksgiving, Christmas, or New Year, is a popular time for charitable donations. Many people are in a giving spirit, and many nonprofits run year-end fundraising campaigns to maximize donations before the calendar year ends.

Tip: Consider matching donations or using these occasions to highlight causes you care about, potentially encouraging others to give as well.

6. When You’re Focused on Social Impact

Immediate Support for Crisis or Disasters: Charitable giving is often time-sensitive in cases of natural disasters, crises, or urgent global issues. If you’re deeply moved by a specific crisis (e.g., a humanitarian crisis, a natural disaster, or urgent medical research), giving during these times can be both emotionally fulfilling and socially impactful.

Ongoing Support for Causes You Care About: Some donors commit to regular giving on a monthly, quarterly, or annual basis to ensure a steady stream of support for a cause they believe in. If you’re committed to long-term support, having a structured giving schedule can be a part of your broader financial and philanthropic strategy.

7. For Specific Charitable Goals (Capital Campaigns or Events)

Capital Campaigns or Major Fundraising Events: Nonprofits often run specific fundraising campaigns with a goal of raising significant amounts of money for a major project (e.g., building a new hospital wing, launching a research initiative, etc.). Giving during these targeted campaigns can allow you to support a specific project and may come with special recognition or opportunities to engage with the organization.

Matching Grant Opportunities: Sometimes, nonprofits will have matching gift opportunities where an anonymous donor or foundation will match gifts up to a certain amount, doubling your contribution’s impact. These opportunities often have deadlines, making it important to donate at the right time to maximize your impact.

8. When Your Tax Situation Changes

When You Experience a Life Event (Retirement, Divorce, Inheritance): Life events like retirement, divorce, or receiving an inheritance can create opportunities or new needs for charitable gifting. For example, if you inherit assets, you may want to donate some portion of those assets to charity, which could help offset potential taxes on the inheritance.

To Offset Income from Retirement Accounts: If you’re withdrawing from retirement accounts like IRAs or 401(k)s, charitable gifting can be a way to offset taxable income. Qualified Charitable Distributions (QCDs) allow individuals over age 70½ to donate up to $100,000 directly from their IRA to a charity without counting the distribution as taxable income.

9. Long-Term Giving and Strategic Gifting

Creating a Giving Strategy: If you want to integrate charitable giving into your long-term financial planning, setting up a strategic gift schedule might be the best approach. Whether through regular gifts, setting up a donor-advised fund (DAF) or foundation, planning ahead ensures that your philanthropy aligns with both your financial goals and the charitable needs you care about. If a charitable entity such as a foundation or donor-advised fund interests you, consideration should be given to some of the differences:

Each donor’s situation is unique, so it’s important to align your charitable gifting with your financial, tax, and social goals. At Suncoast Prosperity Advisors, we pride ourselves in working with our clients and their tax professionals to help you determine the best timing for your charitable contributions based on your overall financial situation.  If you would like any specific information on any of the above topics, we are here to assist.