Popular Methods of Charitable Giving

When it comes to charitable giving, there are many different methods that you could potentially use. All of them will provide you with some type of tax benefit, but they all work a little bit differently. Here are some of the most popular methods of charitable giving.

Cash

One of the easiest and most popular ways to give to charity is with cash. Many charities and churches will readily accept cash donations. You can provide them with actual cash, write them a check, or use a credit or debit card. Some charitable organizations will even allow you to set up an automatic withdrawal from your bank account if you plan on giving on a regular basis.

When you make a cash donation to a charitable organization, you will be able to deduct the entire amount of your donation from your taxable income. For example, if you donate $10,000, you will be able to deduct $10,000 right off your taxable income for the year. The only restriction is that you cannot deduct more than 50 percent of your annual income. You also need to get proof from the organization that you made a donation. Many of them will provide donors with an itemized statement at the end of the year outlining all of their donations.

Appreciated Assets

Something else that you can consider is donating appreciated assets. The investment that has appreciated in value over time can be included in this category. For example, if you purchased shares of stock or a mutual fund and they appreciated, you could choose to give them to charity. This will actually provide you with an even greater tax benefit than if you were to donate cash.

When you cash in an investment that has appreciated in value, you will have to pay capital gains tax on this appreciation. However, when you give these appreciated assets to a charity, you will not have to pay this capital gains tax. In addition to avoiding the capital gains tax, you will still be able to deduct the entire amount of the donation from your taxable income. This gives you two different ways to benefit from this donation on your taxes.

IRA

You can also choose to donate a portion of your IRA to a charitable organization. When you do this, you will not have to count the distribution as part of your taxable income. Typically, whenever you take a distribution from your IRA, you have to count this as income. However, with this provision, you can transfer money directly from your IRA to a charity without it affecting your income at all.

Donor Advised Funds

Another method that you can use is a donor advised fund. With this method, you will contribute a certain amount of tax-deductible money to an account. An account manager will then use this money to invest in securities. As the money brings in returns, portions of the money will be distributed to charities. The amount of money that you contribute is tax-deductible and you will be able to create a source of regular income for specific charities.

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