When the team and I got together for our regular marketing meeting and began planning this week’s blog, we had some ideas. One was to share our favorite holiday recipes and compare the cost of making them to the average cost of a similar dish on the Thanksgiving dinner survey. Being the FPFoCo team, however, we were also working on creating the holiday card we’ll soon be sending to clients like you. And we were voting for the recipient of the annual gift in your honor that we’ll be giving to a NoCo-area human-focused nonprofit. 

That brought our collective train of thought to the fact that, since it’s tax-planning season, you may be thinking about giving, too. In all, chatting about the holiday got us thinking about celebrating gratitude through giving (in addition to eating). We also got to talking about the potential tax perks related to it. 

As you sit down for a meal with your loved ones this week, your gratitude may lead you to consider making a donation to your favorite charity. Perhaps you’ll be preparing to shop on Small Business Saturday or volunteer this holiday weekend. Or maybe you’re thinking about aligning your gifts with the year-end tax planning we just completed, knowing that it’s a win-win situation for you and your favorite nonprofit. 

Whatever your charitable inclination, there may be an associated tax deduction for your donation. Here, I’ll share some of my favorites.

Colorado Gives Day

What used to be a day is now more of a misnomer — but still a great way to give. Colorado Gives Day operates year-round, connecting donors of smaller-dollar figures with those willing to match these donations and double the impact for charities in Colorado.  

Small Business Saturday

While shopping locally doens’t offer a tax deduction, taking part in Small Business Saturday allows you to keep your shopping spending circulating in your community. How? It promotes job growth and your local economy while allowing you to support your friends and neighbors who own those local businesses.

Employer-Matching Donation

With open enrollment season just behind us, do you recall seeing an employer-matching donation listed in your employee benefits guide? This type of corporate giving encourages employees to donate to causes they’re passionate about — and allow their charities of choice to receive a matching donation from their employers.

Charitable Giving and Donation Tax Deductions

If you thought that Colorado Gives Day and employer-matching donations were the only ways to get a double win on your charitable contribution, think again! Your regular charitable donations can also be a win-win, but in a different way, thanks to tax deductions. 

Even if you don’t itemize your tax deductions, you can still take advantage of a state tax deduction on many donations. If you do itemize your deductions, the following are allowable percentages of your adjusted gross income that limit your donation tax deduction …

• 60% limit on cash given to public charities
• 50% limit on non-cash assets (aka “stuff”) given to public charities
• 30% limit on capital-gain assets given to public charities
• 30%/20% for private charities

Ready for a double-win for you and a double-win for the charity you contribute to? You can double-dip on the tax advantage by giving capital-gain assets. These are assets that have grown in value since you obtained them. You get the advantage by not having to sell the assets and, therefore, having no capital gains tax to pay. You also get to take a deduction on the full value of the donated assets … as long as they don’t equal more than 30% of your adjusted gross income. The win on the charity’s side comes in the form of them getting the full value of the assets and paying no taxes as IRS-qualified charities are tax-exempt.

Ready for more donation tax deductions on donated assets? Qualified charitable distributions (QCDs) are pretty unique. You’re eligible to make charitable contributions in the form of distributions from qualified tax-advantaged accounts, like your IRA or beneficiary IRA if you’re 70.5. You’ll notice that this age is disconnected from RMD age. 

If you’re over age 70.5 but under age 73, you have a window of time during which you can donate directly to charities and take a tax deduction for the full amount of the distribution. This can reduce the amount that you have in your IRA-type accounts when it comes time to later take your RMDs. And if you’re RMD age? You can use the QCD as your RMD!

Aligning Gifts with Year-End Tax Planning

If you’re feeling charitably inclined this year, I think you’ll be “thankful” for taking advantage of some tax planning as you get ready to give. While we focus on tax planning consultations in November, you’re always welcome to reach out for a tax projection. Simply send along …

• Your most recent pay stub or income statement
• A statement showing any interest or dividend income, taxable trades, or distributions you completed in accounts we don’t manage for you
• Notes on your charitable intentions and any further distributions you’re expecting to take this year

Riley and I will run a tax projection, and I’ll follow up with recommendations. These can range from an updated Form W-4 to provide to your payroll or human resources department to tax-loss harvesting, Roth conversion, qualified charitable distribution (QCD), required minimum distribution (RMD), and IRA or Roth IRA contribution suggestions. Of course, I’ll also share your projected 2024 tax balance due or expected refund as a preview ahead of tax season.

Who knows? Maybe we’ll save the favorite recipe blog idea for another year and share more than just the recipe for my favorite green bean casserole. After all, I’m so grateful for it that I seem to bring up every year, don’t I?

I hope you get to enjoy some of your favotie things this holiday, too. On behlaf of the FPFoCo Team, happy Thansgiving to you and yours!