How do you give back?

5 Ways to Give

Americans donated $292 billion to charitable causes last year. One reason for our generosity may be that giving makes us happy. In fact, in a recent study, scientists measured the brain activity of individuals who gave versus those who did not and identified a physical change in human brains that links giving with happiness.1 However, despite the joy of giving and a strong economy in 2018, donations were down about 1.1% as compared with 2017. According to Giving USA, a foundation that supports the philanthropic sector, this decline is likely due to a change in the tax code which doubled the standard deduction, reducing the number of people who itemize.2

As the year winds down and giving season begins, it’s time to review your charitable giving strategy. Here is a list of some of your options. Your financial situation and personal goals will dictate the strategies most appropriate for you.



    If you give monetary or physical donations to a qualified charity (or incur expenses for charitable activities), you’re allowed to take a tax deduction provided you itemize. Although you are limited to a tax deduction of no more than 60% of your adjusted gross income (AGI), which may be reduced further depending upon the type of property and who you give to, unused deductions can be carried forward up to five years.3 Other guidelines include:

    • Clothing and household items
      • Must be in good used condition or better and are typically assigned a thrift shop value for deduction
      • Need a formal appraisal if the value exceeds $5,000, and contributions greater than $250 require documentation before your tax return is filed
    • Permitted expenses include
      • Unreimbursed expenses directly connected to charitable services
      • Travel, if there is no significant personal benefit

    It may be possible to boost the amount you contribute by donating appreciated stock directly to a qualified charity. By giving directly, you avoid paying capital gains on the appreciation. This strategy allows you to give more than if you were to sell the stock first, then donate the proceeds. Stock held for more than a year can be deducted at its fair market value. If you’ve owned stock for less than a year, your deduction is limited to what you paid for the stock, or its cost basis. Deductions for appreciated stock is limited to no more than 30% of your AGI; and, as with cash contributions, you can carry forward unused deductions for up to five years.


    If you’re 70 ½ or older, you may be eligible to make a Qualified Charitable Distribution (QCD) gift of up to $100,000 directly from your IRA to a public charity. The gift would count toward satisfying your Required Minimum Distribution (RMD) and would be excluded from your taxable income. Keeping taxable income lower could reduce the impact to certain tax credits and deductions, taxation of social security income and Medicare surtax and surcharges. QCDs don’t require that taxpayers itemize so you may take advantage of the higher standard deduction while still benefiting from the QCD. They may also be appropriate for those who live in a state that does not offer an income tax break for charitable contributions. Funds must be given directly to the charity by the RMD deadline which is generally December 31. If funds are first distributed to the name of the IRA holder, then given to the charity, they will not qualify as a QCD.


    A Donor Advised Fund (DAF) allows you to transfer assets earmarked for charity into a separate account maintained by a qualified sponsoring organization. And, you can take the tax deduction right away but distribute your charitable grants over time.4 A DAF is an efficient alternative to a private foundation because it is easy to set up and subject to minimal ongoing expense and oversight. A DAF can accept stock, real estate and other investments. The donor also benefits from no capital gains tax on their gift. Once in the DAF, the underlying assets may grow tax free as you are deciding which charities you wish to grant to. Accounts can be passed down to a different owner, creating a charitable legacy.


    A Charitable Remainder Annuity Trust (CRAT) can help you combine your philanthropic and wealth shifting goals. A CRAT allows you to generate a fixed income stream for a term. Then, the remainder of what is in the trust transfers to the charity designated as a beneficiary. The IRS allows a charitable deduction for the present value of the future charitable remainder at the time of the funding. A CRAT is not subject to income tax and the income and gains of the CRAT are taxable to the non-charitable beneficiaries of the CRAT only when they are distributed. A Charitable Lead Annuity Trust, or CLAT, is the opposite in that the designated charity receives a fixed annuity for a designated term, with any remainder passing to a non-charitable beneficiary.

Your charitable goals and financial situation will determine the philanthropic giving strategy that’s right for you. Contact your Luma Wealth Advisor to review your situation and determine the best approach for you and your family.

1 A neural link between generosity and happiness, Nature Communications, published July 11, 2017
2 Giving USA 2019: The Annual Report on Philanthropy for the Year 2018, a publication of Giving USA Foundation, 2019, researched and written by the Indiana University Lilly Family School of Philanthropy. Available online at
3 IRS Publication 526 Charitable Contributions
4 IRS, Donor-Advised Funds
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