Charitable giving: How to strategize your donations

Over the past few years, charitable giving has been strong; in 2022, U.S. charitable donations given by individuals totaled nearly $320 billion.** The generosity of Vanguard investors and people all over the world continually inspires me, and I'm honored to support and guide my clients toward their philanthropic goals. But one mistake I see clients make is that they sometimes fall short of their charitable goals because they don't plan their giving in advance.

Just like saving for any long-term goal, charitable donations need a strategy, and Vanguard's a trusted partner when it comes to financial strategy. In fact, 3 times as many investors report having peace of mind about investing because of their advisor.*** So let's help you build a formal plan and update it each year. It can help you meet your charitable goals while maximizing available tax savings.

Here are 6 long-term strategies I often share with my clients to help them make the most of their charitable giving.

1. Donate appreciated assets instead of cash

It's easy to donate cash. But by giving appreciated securities, you can give more money to your charities and less to taxes. This is because you won't have to pay capital gains taxes when you donate appreciated assets, and your charities don't have to pay taxes when they sell them.

For example, if you wanted to give $10,000, you could give it as a cash gift. But if you have a stock fund whose value has increased by $10,000, consider donating the fund instead. You won't owe capital gains tax on the asset, you'll still receive a charitable deduction, and you'll meet your giving goals—possibly having paid less out of pocket.

4. Consider qualified charitable distributions

If you have an IRA and are over age 70½, you can make a qualified charitable distribution (QCD). While IRA distributions are normally taxable, a QCD is not subject to ordinary federal income taxes if it's paid directly to a charitable organization. You can exclude up to $100,000 of income by making a QCD if you're eligible. Couples that file joint tax returns can make QCDs of up to $200,000, as long as each individual has an IRA and is at least 70½. 

Once you turn age 73†, you're required to begin taking required minimum distributions (RMDs) from most types of tax-advantaged retirement accounts, like IRAs. QCDs count toward required minimum distributions for the year. Making QCDs can be a great strategy if you're looking to make charitable donations and don't need your full RMD. One of our financial advisors can help you figure out if this strategy makes sense for you and your situation.

5. Spread charitable giving throughout the year

While most charities receive the bulk of their donations during the year-end "Season of Giving," many organizations need funds year-round. Giving consistently throughout the year—rather than giving in bulk—can help with this. It may also help you budget for a bigger gift overall. A Vanguard personal advisor can help you automate your gifting by setting up an automatic withdrawal plan for your QCDs to run monthly, quarterly, or whenever works best for you. It's one of the many benefits of investing with Vanguard. Our advisors are here to plan and prepare with you, providing financial strategies customized to your specific goals, needs, and situation.

6. Name a charity as a beneficiary or leave a bequest in your will or trust

Thinking about what may happen after you're gone isn't anyone's favorite topic. However, I often encourage my clients to consider building charitable bequests into their estate plans if they're worried about giving too much too early.

Look at this as an opportunity to create a legacy of giving. Naming a charity as a beneficiary or leaving a bequest in your will or trust allows you to give to causes meaningful to you without overextending yourself if you need to spend more on long-term care or other expenses. Additionally, charitable bequests are eligible for estate tax deduction and can reduce estate taxes.

Wondering what organizations to give to? Vanguard Charitable has tools to help you narrow your search.

Want help preserving your wealth?

Working with Vanguard gives you anytime access to advisors who are fiduciaries—always acting in your best interests. They'll provide tangible value through investment coaching to help you strategize your donations, save for retirement, and more. Come experience the peace of mind advice services may provide you. Call us at 844-968-0818 Monday through Friday from 8 a.m. to 8 p.m., Eastern time.

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