Everyone has a unique perspective on how they can make a difference in the world, and finances play a crucial role in this. Our emotions, biases, upbringing, and fears shape our relationship with money and what we value most. For some, wealth isn't just about net worth - it's about creating a philanthropic impact on others.

There are various ways to make a difference, from sharing financial resources with those who matter most to making charitable donations. Charitable giving offers numerous benefits, including tax deductions, the potential for tax-free growth of philanthropic assets over time, and estate tax reduction. However, it is not just about donating money; it is about helping those in need and building stronger social connections while finding meaning and purpose.

Forward-thinking legacy planning and financial stability ensure your values carry on through giving. While no one likes to think about their mortality, being proactive is one of the greatest gifts you can give your loved ones. As your trusted guide, we can empower you to leverage your money to support your values and secure your future. By approaching your giving with intention and foresight, you create a lasting impact that transcends beyond the present and into the future. 

Charting Your Charitable Compass: Understanding Your Philanthropic North Star

Giving back is a noble cause, but it's crucial to approach it with a clear mission statement. 

Here are some steps to help you define yours:

• Start by reflecting on your interests and passions.

• Consider your values and beliefs that align with giving.

• Research organizations and causes that are in line with your values.

• Set specific and measurable goals for your giving.

• Think about the impact you want to make and the legacy you want to leave.

• Assess the resources (time, money, skills) you can commit to philanthropy.

• Involve others in your giving journey, whether it's friends, family, or like-minded individuals.

• Reflect regularly on your progress and adjust your giving strategy as needed.

Being emotionally invested in charitable causes is essential for ensuring follow-through and making informed decisions about resource allocation. Aligning philanthropy with personal passions creates an authentic and sustainable approach to giving back to the community, leading to more impactful giving. 

Passion-driven philanthropy can also inspire others to give and create a ripple effect of philanthropy. Take the first step in aligning your giving with your passions to experience the emotional fulfillment of contributing to causes that hold personal significance.

Here are some examples of what your mission statement might look like:

"I want to positively impact the environment by supporting conservation and sustainability organizations."

"I aim to reduce poverty by donating to organizations that provide economic opportunities and resources to disadvantaged communities."

"I want to use my skill and expertise to mentor young professionals in my field and support programs that provide mentorship opportunities."

You can do good by strategically incorporating giving into your financial plan while reaping financial rewards. It also helps you develop a more integrated and sustainable approach to managing your money.

The Tax-Efficient Trailhead: How Charity Can Save You Money and Make a Difference

Did you know you can contribute to charitable causes and decrease taxes? It's true! 

The benefits of charitable giving go beyond the warm, fuzzy feeling of doing good. When you give back, there are many tax advantages. 

Tax deductions allow you to reduce your taxable income by your donation amount, while tax credits directly reduce the tax you owe. And that's not all! Other tax incentives, like gift and estate tax benefits, can maximize the impact of your donation to others. By giving, you can simultaneously positively impact the world and save money on taxes.

Here are some ways in which giving can help reduce your tax burden:

Leverage your gift tax exemption for charitable giving! A gift tax exemption allows a person to give up to a certain amount per year to another individual without having to file a gift tax return. Of course, if your charity of choice is a 501c3 organization, donations are also exempt from gift taxes.

Get a tax deduction for your generosity! You can deduct charitable contributions from your taxable income. A generous contribution is a voluntary donation or gift to or for the use of a qualified organization, made without getting or expecting to get anything of equal value. Charitable contributions are generally tax-deductible for individuals who itemize deductions on their tax returns. Doing this can lower your overall tax liability and reduce taxable income.

A few key points:

• You must contribute to a qualified organization to receive the deduction. Eligible organizations include tax-exempt organizations such as churches, educational institutions, and certain hospitals under section 501(c)(3) of the Internal Revenue Code.

• The deduction is limited to a percentage of the donor's adjusted gross income (AGI). The deduction is generally limited to 50% of the donor's AGI for individuals, while for corporations, the limit is typically 10% of the donor's taxable income.

• The deduction is also limited to the amount of taxes the donor owes. The deduction can only reduce the donor's tax liability to zero, and you cannot carry forward unused credit to future tax years.

Gift assets before you go. Estate taxes are taxes imposed on a deceased individual's assets and properties. These taxes are levied on the estate at the time of death and are calculated based on the total value of the assets and properties that the individual owned at the time of their passing. 

One way to avoid them is by gifting assets before death. A few key points:

• The gift must be made without strings attached, meaning the donor cannot retain control or benefit from the gifted assets.

• There are annual gift tax exemptions for individuals. For 2024, each individual can gift up to $18,000 annually to unlimited recipients without incurring gift tax.

• Gifting assets can also reduce an estate's overall size, reducing the heirs' tax liability.

Donate appreciated assets, such as stocks or real estate. Charitable donations come with unique tax benefits, especially when giving appreciated assets such as property or stocks. By donating these assets, you may qualify for a deduction equal to the asset's market value, and you won't have to pay capital gain taxes. 

Consider donating securities you have held for over a year to a donor-advised fund or a public charity to receive a deduction for your securities' fair market value and avoid capital gains taxes. Most charitable organizations accept publicly traded securities like mutual funds, ETFs, bonds, and stocks since they are easy to transfer. 

While donations of property or cash are deductible up to 60% of the donor's adjusted gross income, contributions of long-term appreciated assets are up to 30%. Keep proper records and documentation to claim the deduction on your tax return. 

Here are some key points to consider:

• If the securities have increased in value, the donor can take a tax deduction based on the fair market value of the assets rather than the cost basis, which may result in a larger deduction and lower tax liability for the donor.

• Donating appreciated assets can also help donors diversify their portfolios. For example, if a donor has a significant position in a particular stock, donating some of those shares can help reduce concentration risk and improve the overall diversification of their portfolio.

• Some charities also prefer donations of appreciated assets, as they do not have to pay capital gains tax when they sell the assets.

Donor Advised Funds (DAFs) are a great way to donate to multiple charitable causes while enjoying tax benefits. They function as a philanthropic savings account where you deposit money and determine which causes you to wish support over time. Using a DAF, you can make a large donation in one year and then spread the distributions to your favorite charities over several years, increasing the tax benefits. 

This approach is often overlooked but can be a valuable tool for those looking to give back to their community flexibly and tax-efficiently.

Additionally, DAFs can help reduce tax burdens from a windfall, such as an inheritance, business sale, or strong market returns. You can also take an immediate tax deduction when you contribute to your DAF, which can reduce your tax liability.

With appreciated assets like stocks or real estate, you can donate them to a DAF and avoid paying capital gains tax while still getting a tax deduction. Plus, you can contribute more in one year and spread out the donations over time, getting the most out of your tax deduction.

DAFs provide high flexibility and control over charitable giving, as you can choose when and how much to distribute to your selected charities. They can also act as a "bank account" for philanthropy, allowing you to build up a pool of assets over time and then make grants to charities over an extended period.

Furthermore, DAFs can serve as milestones for donors, helping them track their progress toward charitable goals. For instance, you can donate $10,000 to a particular cause over the next five years and track your progress toward that goal. DAFs can also give donors a sense of accomplishment and motivation as they reach milestones.

In summary, a donor-advised fund (DAF) is a charitable savings account that offers donors tax benefits upfront and allows them to support their favorite charities over time. DAFs simplify the giving process and provide flexibility to recommend grants when the donor is ready. You can modify your donation amount, update the causes you support, and donate anonymously to keep your donation private. With a DAF, you can decide how, when, and where you want to make a difference.

Charitable giving is a sound financial strategy with multiple tax benefits. By utilizing your gift tax exemption, earning a charitable contribution credit, and donating appreciated assets, you can reduce your tax burden while supporting philanthropic causes. 

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Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, when sold, may be worth less or more than their original cost.