As 2024 unfolds, the investment landscape has brightened for many, leading to significant gains across various asset classes. For investors who wish to extend their success beyond personal profits, this year’s Giving Tuesday, nestled conveniently between Cyber Monday and the holiday season, offers an excellent opportunity to make a positive impact through charitable contributions.
The increase of over 26% in the S&P 500 illustrates a booming market, which has prompted many investors to consider not just their financial portfolios but also their potential influence on societal betterment. For those who believe in social responsibility, channeling some of those earnings into charitable organizations can be not just generous but also strategically beneficial.
Traditionally, cash donations have been viewed as the simplest form of charitable giving. However, in an era where the investment environment is increasingly lucrative, professionals like Brandon O’Neill from Fidelity Charitable emphasize the advantages of donating appreciated assets. Such contributions, whether they come in the form of stocks, mutual funds, or even emerging digital currencies like cryptocurrency, can significantly amplify the donor’s impact.
One of the principal motivations for gifting appreciated assets rather than cash is the considerable tax savings it can yield. The attraction lies in avoiding capital gains taxes that would otherwise apply if the asset were sold. By transferring these assets, donors not only secure a tax deduction based on the fair market value at the time of the donation but also sidestep any potential tax liability linked to appreciation.
As underscored by tax professionals such as Miklos Ringbauer, assets with low cost bases and substantial appreciation present optimal opportunities for donations. Individuals who itemize their tax deductions and whose itemized figures surpass the current standard deduction thresholds can reap significant rewards by contributing these assets.
Statistics from Fidelity Charitable indicate a notable trend: non-cash assets constituted 63% of contributions in the previous year, with significant sums coming from the innovative realm of cryptocurrencies. With $688 million worth of crypto donations recorded as of mid-November, it is evident that the landscape of charitable giving is evolving, reflecting broader investment trends.
For asset holders whose investments have enjoyed staggering growth—like Palantir Technologies and Vistra Corp., which have seen increases exceeding 300%—there is an array of strategic reasons to consider gifting instead of liquidating these positions.
The recent tax landscape, shaped by high standard deductions, opens discussions surrounding “bunching” contributions. By consolidating several years’ worth of giving into one larger donation, investors can maximize the tax advantages during specific years while utilizing a donor-advised fund to streamline their philanthropic efforts. This method allows for flexibility in the future, letting donors take standard deductions in alternate years.
For older investors, particularly those over the age of 70 1/2, solutions like qualified charitable distributions (QCDs) from IRAs present a compelling option. Rather than letting tax obligations nibble away at their retirement savings, QCDs can divert funds directly to charity, effectively excluding these amounts from taxable income. By implementing QCDs, individuals not only fulfill their charitable desires but also manage their investment portfolios more efficiently.
As we navigate the forward momentum of 2024, the chances for philanthropic engagement have never looked better. With the market’s upswings generating considerable asset appreciation, donors are presented with unique opportunities to maximize both their charitable contributions and tax advantages. This Giving Tuesday, individuals should contemplate the benefits of donating appreciated assets rather than merely cash and consider strategic giving methods like bunching or utilizing QCDs from their IRAs.
At its core, charitable giving not only helps those in need but can also enrich the lives of donors by reinforcing their financial strategies. With thoughtful planning and awareness, investors can transform their newfound wealth into a lasting legacy of generosity that benefits communities and organizations in meaningful ways.