The Five Best Year-End American Strategies for Worldwide Charitable Giving
October 16, 2023
The holiday season is a traditional time of joy, generosity, and reflection, where the spirit of giving shines brightly. It's a time when many of us are inspired to give back to our communities, and support causes close to our hearts. CAF America is a global grantmaking organization enabling Americans to support charitable causes in America and over 135 countries across six continents. As President and CEO, I understand the profound significance of this season, especially in light of so many pressing needs around the globe.
The world is facing unprecedented humanitarian crises, seemingly one right after the other, with millions suffering from conflict, displacement, disaster, hunger, disease, and poverty. Imagine being a Ukrainian refugee, a hurricane survivor in Haiti, or a child in Türkiye or Syria, all facing unimaginable challenges. These are just a few of the countless individuals and communities worldwide who rely on your compassion and support during the holiday season. The need for assistance is more significant than ever and is growing daily.
Strategy #1: Donor-Advised Funds—How to Maximize Your Tax Deduction While Streamlining Your Giving (and Receipts)
Donor-Advised Funds (DAFs) are a powerful tool for strategic philanthropy. A DAF is a charitable giving account that allows you to:
- Donate cash, securities, or other assets to a sponsoring organization, such as CAF America, before the end of the year and receive an immediate tax receipt;
- Recommend grants to your favorite charities in the US and around the world at any time without any additional paperwork or receipts; and
- Simplify your giving, consolidate your tax deductions, and support the causes that matter to you.
To use a DAF, you need to:
- Open an account with a sponsoring organization that meets your needs and preferences. CAF America is a trusted and experienced sponsor that will help you support causes important to you and give globally with confidence and ease
- Contribute to your account before December 31st to qualify for a tax deduction for the current year. You can donate cash, stocks, bonds, mutual funds, real estate, or other assets. CAF America will provide you with a tax receipt for your donation's full fair market value; and
- Recommend grants to any eligible charity in the US or abroad, at any amount and frequency. CAF America will validate the charities for compliance and due diligence and distribute the funds according to your wishes. You can also track your giving history and impact online.
By contributing to a DAF before the end of the year, you may be eligible to claim a current year tax deduction while having the flexibility to recommend grants to your favorite charities over time. This structure allows you to plan your giving without feeling rushed or pressured by the holiday season. You can also take advantage of the increased limits for charitable deductions under the current tax law.
It's essential to note that overall deductions for donations to public charities, including donor-advised funds, are generally limited to 50% of your adjusted gross income (AGI). The limit increases to 60% of AGI for cash gifts, while the limit for appreciated non-cash assets held more than one year is 30% of AGI. If, however, your 2023 contribution and deduction exceed these AGI limits, you do not lose the deduction. Instead, the amount above these limits may be carried over for up to five subsequent years.
Strategy #2: Boost Your Giving and Save on Capital Gains Taxes with Non-Cash Donations
Donating appreciated assets can be a smart philanthropic strategy, enabling you to receive a tax deduction based on the asset's fair market value while also avoiding capital gains tax if you were to sell the stock. CAF America accepts a wide range of complex or illiquid assets, from artwork and stocks to real estate. We collaborate closely with your financial advisor to ensure that any donations involving these intricate assets are seamlessly transformed into charitable contributions while maximizing the associated tax benefits.
By choosing to contribute such assets to a qualified charity like CAF America, you can:
- Receive a tax receipt for the full fair market value of the asset, as determined by a qualified appraisal;
- Eliminate capital gains tax on the asset's appreciation, which can be as high as 20% for long-term gains; and
- Amplify your giving, as you can donate more than the asset's initial purchase price or the after-tax proceeds were you to sell the holdings before donating the net cash after taxes.
Making non-cash donations of appreciated assets is a generous act, and a financially savvy one. By partnering with a charity like CAF America, you can harness your assets' full potential to positively impact the causes that matter most to you. To get started, transfer asset ownership before December 31st to maximize your current-year tax benefits and ensure you obtain a qualified appraisal within the specified timeframe. With these steps, you can optimize your giving, reduce your tax liability, and make a substantial difference in the lives of others.
Strategy #3: Validated and Anonymous Donations to Local and Global Causes
If you are looking for new opportunities to make a difference this holiday season, you might want to explore our Global Charity Database. It is a resource that helps you discover and connect with local charities in the United States and 135 other countries. These charities work on various causes you care about, such as hunger, education, healthcare, and more. By supporting them, you can have a direct and immediate impact on pressing issues around the world. You can also diversify your giving portfolio and receive valuable US tax receipts for your donations. CAF America will ensure that your giving is done in a compliant and risk-managed way, protecting both your reputation and the reputation of the charities you support. You can create positive and lasting change in the world with thoughtful and responsible giving.
One of the benefits of giving to a DAF is the ability to make your gift and advised grants anonymously. Your charitable contribution can benefit charities without revealing your personal information to the recipients. This way, your contribution can support grants advised on your terms without being added to mailing lists or receiving unwanted solicitations. Giving anonymously also has other benefits, such as avoiding the burden of indebtedness or expectation from the recipients and focusing on the impact of our gifts rather than on our reputation or recognition. You can enjoy the tax benefits of giving while keeping our privacy intact.
Strategy #4: Bunch Your Giving to Beat the 2023 Standard Deduction
Suppose you want to optimize your tax benefits and make an even more significant impact. In that case, you may want to consider the strategy of "bunching" your charitable giving into a single year. This means you make more significant donations in one year and skip or reduce your donations in the following years. This way, you can exceed the standard deduction threshold and claim the full tax benefits of your charitable contributions. The standard deduction is the income not subject to federal income tax. It varies depending on your filing status, such as single, married, filing jointly, or head of household. The standard deduction is adjusted annually for inflation, and it has increased significantly since the Tax Cuts and Jobs Act of 2017 was passed during the Trump administration.
According to IRS.GOV, in 2023, the standard deduction will rise by about 7% due to the higher inflation in 2022. The standard deduction will be $13,850 for individuals, $27,700 for married couples filing jointly, and $20,800 for heads of household. This means that if your total itemized deductions, including your charitable donations, are less than these amounts, you will not benefit from itemizing and will be better off taking the standard deduction.
However, if you bunch your giving into a single year, you can surpass the standard deduction threshold and itemize your deductions. For example, if you are an individual who typically gives $5,000 per year to charity, you can bunch your giving by donating $15,000 in one year and nothing in the next two years. This way, you can itemize your deductions in the year you (single payer) contribute $15,000 and take the standard deduction in the other two years. Depending on your individual situation, this may result in a lower taxable income and higher tax savings than if you spread your donations evenly over three years. Bunching your giving can also help you make a more considerable difference for the causes you care about. By making larger donations in one year, you can provide more immediate and substantial support to the charities that need it most. Bunching your giving can help you create a more effective and meaningful philanthropy.
Strategy #5: Leverage Employer Matching Gifts Programs for Global Impact
As you embark on your philanthropic journey, consider the often overlooked power of employer-matching gift programs. These programs have been around since the very first was created and funded in 1954 by General Electric. Matching gifts can extend beyond borders, aligning seamlessly with the global scope of charitable giving. At CAF America, we recognize the importance of making your generosity count on a worldwide scale. Many multinational corporations provide matching gift programs, meaning your contributions can double (or more) the impact. When you donate to a validated charity through CAF America, your employer may match your gift, effectively multiplying your support for causes worldwide.
Our expertise in global philanthropy ensures that your charitable giving aligns with regulatory compliance and maximizes its positive influence. By engaging with your employer's matching gifts program, you not only enhance the reach of your generosity but also contribute to building a fair and sustainable future for communities worldwide.
Start Your End of Year Giving Plans Today
The holiday season offers a unique opportunity to create a profound global impact through strategic and tax-efficient charitable giving. By embracing these year-end strategies, you support the causes dear to your heart and magnify your philanthropic influence while enjoying valuable tax benefits. Consult your personal tax advisor for the full impact of your charitable giving. True giving is about the positive transformation you bring to the lives of others, and these strategies empower you to achieve just that while optimizing your financial well-being.
At CAF America, we recognize the importance of worldwide charitable giving and possess the expertise to ensure that your generosity aligns with regulatory compliance, creating a lasting impact in communities worldwide. Let your generosity shine a light on a world in need this holiday season, reflecting your compassion and commitment to effecting positive change.
Disclaimer: All of the recommendations in this piece should be taken as recommendations only, not qualified tax advice. If you have questions about how these strategies could apply to you, we recommend you consult a qualified tax professional.
About the author:
Ted Hart ACFRE, CDP®, CDE®, CAP® serves as President and CEO of CAF America and CAF Canada. As an internationally recognized speaker with over 35 years of experience advising philanthropy, he has expertise in regulatory frameworks governing both domestic and global grantmaking and risk management.