Charitable giving is bigger than dollars and cents. So when clients want to build charitable giving into their financial plan, we start there: What do you want to accomplish, and why is this cause important to you? That can help us figure out innovative ways to maximize your impact. It may be a simple case of donating something small each month. Often, however, giving strategically can help  you do even more good.

Let’s look at a few ways to get strategic about charitable giving.

1. Maximize your cash donations. If you’re hoping to donate cash, think about how much you’re planning to donate. You can deduct these donations from your taxable income up to a certain amount, but only if you itemize your taxes. For some families, it can make sense to “bunch” their cash donations into a single year—a year they plan to itemize—to fully take advantage of the deduction. If you donate cash during a year where you take the standard deduction, the money will still go to a good cause, but you won’t see a tax benefit. If donation bunching sounds like an appealing strategy, but you’d prefer to give to the charity each year (as opposed to every few years), you could take advantage of a donor-advised fund.

2. Use a donor-advised fund. Donor-advised funds (DAFs) can help you maximize your impact with a specific organization. You open a fund with a specific 501(c)(3) charity (a ‘sponsoring’ charity, so to speak). Once the fund is opened, you can advise how you’d like your contributions to be used. So, you might front load your contributions one year and itemize the donation on your taxes. But, you could specify that those funds be released over the next three years, simulating annual donations. The other nice thing? You don’t have to donate cash. You can also contribute stock or other assets.

3. Donate assets instead of cash. When you donate cash, you have to itemize the deduction to reap any benefit. The same is true when you donate an asset, like stock. However, donating an asset can help you avoid potential capital gains taxes. Consider an example. If you bought 100 shares of stock for $10 a share and three years later it was worth $35 a share, selling those shares would result in a $2,500 profit ($25/share x 100 shares), and you’d likely need to pay capital gains tax on that amount. If you donated those shares, however, you’d be able to deduct a $3,500 charitable donation, and you wouldn’t need to pay any capital gains tax. It’s not uncommon for people to think they need to sell their shares first; many people don’t realize most charities will accept donations of stock and other assets. You may need to do a bit of coordination, but this can pay off big for you and the charity.

4. If you’re retired, consider qualified charitable donations. These donations, known as QCDs, are made directly from an IRA to a qualified charity. These contributions can count toward any required minimum distributions (RMDs) you may be required to take for the year and you won’t need to pay income tax on the amount you donate. It’s important that these donations are handled properly for them to count with the IRS. Mistakes, like withdrawing funds before making a donation, can trigger an income tax payment that reduces your charitable contribution.

If you want to donate substantial amounts—you may be able to get even more strategic about your giving. If you want to create a lasting impact or have more control over how your money is spent, you might consider establishing a charitable foundation (which can be done as a private foundation or a general charitable nonprofit) or a charitable trust. These ventures can be complex—they involve legal and tax documentation that help ensure your wishes are carried out efficiently. If this is something you’re interested in exploring, we can help you coordinate a strategy with relevant third party assistance.

If you’re interested in getting strategic about your giving—whether it’s figuring out how bunching donations could work in your financial plan, donating appreciated stock, setting up a DAF, or going even further, set up a meeting to discuss your options. We’d love to work with you to help you maximize your positive impact.