No tax benefit for your charitable giving? Here are 2 workarounds.

/ Planning Within Reach/

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If you're taking the standard deduction on your tax return in 2023, it means that you will not get any tax benefit for any charitable contributions that you made last year. It doesn't mean that you shouldn't give to charity, but that is something that does confuse a lot of people.

You need to itemize your deductions on the Schedule A to get any tax benefit for charitable contributions.

There are a couple of workarounds.

#1 Bunching your contributions.

So let's say that you give $5,000 to charity every year. You could give $10,000 in one year and nothing the following year if giving that $10,000 bumps you up enough to be able to get a little bit of a tax benefit and itemize your deduction for those contributions.

The other strategy is for people over the age of 70 1/2.

#2 The QCD Strategy - qualified charitable distribution strategy.

This is where you donate funds directly from your IRA to charity. While this is not a deduction, the IRA distribution is not fully taxable as it should be. So it saves you money in taxes and it gets around the fact that you don't itemize. The QCD limit is $105,000 for 2024 per person and the money must go directly to a 501(c)(3) charity, it cannot go to a donor-advised fund (DAF). The donation must be received by 12/31 and the QCD can count towards your required minimum distribution (RMD). Verify that the charity receives the donation and obtain a letter noting that you did not receive any benefit for this contribution.

Really important - that 1099R that you receive when you distribute money from your IRA will not indicate how much of that distribution was a QCD. So if you just enter the information as shown on the form, or you don't tell your tax person, you're not going to get that tax savings. Make sure you keep good records and keep your tax person in the loop so that you can benefit from this strategy.

My name is Linda Rogers, Owner of Planning Within Reach.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.