Person using laptop and earphones on city bench.
Personal finance

Year-end charitable giving tips to consider

Advice on end-of-year charitable giving—ways to give back, donor-advised funds, and tax deduction suggestions for maximizing your impact.
8 minute read
  •  
December 18, 2023
Personal finance
Wealth management
Article
Taxes
Page
Charitable giving
Headshot of Vanguard Chief Strategic Planning Officer Rebecca Moffett

President of Vanguard Charitable

It's almost the end of 2023, and many of us are reflecting on what the past year has brought and wondering what we can expect in 2024.

As the president of Vanguard Charitable, I'm amazed at how our donors, team members, and partner organizations have worked to maximize the impact of charitable giving this year. Despite this year's economic uncertainty, our donors have continued to use their donor-advised funds to support a record pace of giving. In fact, as Vanguard Charitable celebrates 25 years in operation, our donors have set a record-granting total for the seventh straight year and have surpassed $2 billion in annual grants for the first time ever.

But of course, our world is facing many challenges as this year ends. Charitable giving was down last year for only the fourth time in the last 40 years, and higher prices have left charities with difficult decisions. Global conflicts and natural disasters have brought continued hardships. All of this means that now is a great time for generous individuals to take action.

As we grapple with these challenges, you may be thinking about how you're best positioned to help. After all, 2023 isn't quite over, so there's still time for you to make a difference.

Charitable giving: What you should know

Uncertainty can cause people to delay giving decisions. We're all facing an unpredictable environment and you may be wondering what the world will look like in 2024—including how markets will perform and whether the economy will achieve a "soft landing." My advice? When it comes to charitable decisions, focus less on what's unknown and more on what we can count on to be true. For example:

  • You can give back in more ways than one. We often hear our donors tell of the value of their "time, talent, and treasure." Volunteering, serving on a board, or offering other expertise in support of charities are wonderful ways to make a difference. For those with a skill in demand—think graphic design, accounting, or social media management—consider reaching out to your favorite nonprofit to see how you can "donate" your skills to further their mission.
  • There are tax benefits associated with giving. For those looking to donate financially, the charitable tax deduction incentive is the same as it's been in recent years and is unlikely to change before year-end. With the Tax Cuts and Jobs Act set to expire at the end of 2025, changes may be on the horizon. For now, however, taxpayers can take advantage of the provisions currently in place.
  • Financial gifts can go far beyond cash. Remember that what you give may be just as important as how much you give. Despite economic volatility, many assets are close to all-time highs. This means you might own an appreciated or even highly appreciated portfolio. Donating these appreciated assets instead of withdrawing cash could be a financially savvy move. You could also donate illiquid assets such as private equity, hedge fund interests, C corporation stock, real estate, LLCs, limited partnerships, and more. While not all charities can accept illiquid assets, a donor-advised fund provider like Vanguard Charitable can help turn those assets into giving impact. Review your portfolio with a Vanguard advisor (if you're a client of Vanguard Personal Advisor®) to make sure you're maximizing the tax benefit of your charitable gifts.
  • We're here to help if you need us. Year-end is a critical time to examine your giving options. At Vanguard Charitable, we're focused on making sure our donors and the broader public are supported in meeting their giving goals, so we offer tools and resources to help you make the most of giving.
    • Our resource, Developing Your Charitable Budget, helps you think through ways to expand your impact. Individuals who make a charitable budget are generally more likely to give and to increase their giving each year.
    • Our Tax-Savings Calculator can give you an idea of how much you'll save depending on the amount of your charitable donations.*
    • The third season of our podcast, The Value in Giving, amplifies voices across the world of philanthropy, connecting donors to inspirational nonprofit and industry leaders.
    • How do you know where to start? Giving Matters: A Guide to Mapping Your Charitable Plan can help donors transform their charitable giving from what may be a scattershot approach to a strategy that is thoughtful, aligned to donor values, and focused on long-term impact.

 

5 end-of-year charitable giving tips

  1. Generally, only donations to a qualified 501(c)(3) charitable organization are eligible for tax deductions. (Vanguard Charitable is a qualified charitable organization, and we ensure that any grants you recommend from your donor-advised fund account go to other qualifying organizations.)
  2. To get the tax deduction, make sure you itemize deductions on your tax return instead of taking the standard deduction. (You'll only want to do this if your itemized deductions exceed the standard deduction.) If your itemized deductions don’t exceed the standard deduction, you can consider “bunching” multiple years’ worth of charitable gifts into one year to maximize your tax benefit.
  3. Although there are limits on your tax deduction (depending on your income and what you're donating), you can deduct excess contributions over the next 5 years.
  4. Strategies like donating appreciated assets (rather than cash) or directing your required minimum distribution to a qualified charity can help you save even more on taxes.
  5. The tax deadline to make donations for 2023 is December 31—but that's a Sunday, so you may want to plan ahead. If you're donating assets other than cash, it can get a bit more complex, and you'll want to initiate the process even sooner.

Use a donor-advised fund or charitable accounts

Once you figure out how much you're giving and which assets you're donating, you might want to think about how you should give—specifically whether you should leverage a giving vehicle of some sort. There are a few different types of giving vehicles—private foundations, donor-advised funds, charitable trusts—and they differ in terms of features and costs. When comparing your options, keep in mind that many giving tools can be used together.

See the 3 elements of a successful giving plan (PDF)

A giving vehicle is one great way to make your giving budget go further. Our Why Giving Matters report, for example, found that Vanguard Charitable donors give more and give more effectively with a donor-advised fund. The purpose of a giving vehicle is simple: to transfer assets to charities in a carefully planned way that makes financial sense and maximizes your charitable impact over time.

What to consider when choosing a giving vehicle

See giving tools

FAQ

  • Generally, you only qualify for a charitable tax deduction if you elect to itemize your deductions when you file your annual tax return. Itemizing only makes sense if your itemized deductions exceed the standard deduction available to you.
  • Gifts to individuals don't qualify as tax deductible. Confirming 501(c)(3) status is the easiest way to make sure an organization is eligible to receive a tax-deductible gift.
  • It's recommended that you keep a record of all monetary gifts such as those made via cash, check, securities, etc. For gifts over $250, the charity should provide you with a written acknowledgement that includes the date and amount of the gift. 

  • Yes. According to GivingUSA, giving is down for only the fourth time in the last 40 years.** However, at some charities, like Vanguard Charitable, giving is up as donors use donor-advised funds to sustainably support charities over time.

  • You can, but it will count toward the following tax year. To be eligible for a 2023 charitable tax deduction, your gift must be made this year. 

  • Making a charitable contribution before the end of the year entitles you to a charitable tax deduction, provided you itemize your deductions when you file your tax returns. Contributing long-term appreciated securities held for more than one year generally entitles donors to an additional tax benefit—the reduction of any long-term capital gains that may have applied had the appreciated securities been sold.

Note: If you're planning on using a giving vehicle, make sure you pay close attention to the fees. It's important to remember that the lower the fees, the more money you'll have to donate to the charities you admire. At Vanguard Charitable, our donor-advised fund comes with the lowest all-in fee in the industry. That translates into a lot of extra dollars you can donate to the causes you care most about.

As we approach the end-of-year charitable giving deadline and consider the pressing needs of our world today, I continue to believe that philanthropy changes the world one life at a time. By approaching charitable giving thoughtfully and strategically, we can maximize our impact and reach even more lives.  

 *The information provided is not intended to be relied upon in lieu of tax or legal advice. Please consult with a tax advisor or attorney for information related to your specific situation.

**Source: Giving USA | A public service initiative of the Giving Institute

All investing is subject to risk, including the possible loss of the money you invest.

We recommend you consult a qualified tax advisor about your individual situation.

Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.

The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.

VAI and VNTC are subsidiaries of the Vanguard Group Inc. and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC nor its affiliates guarantee profits or protection from losses.