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Maximizing Your Charitable Deductions: 6 Key Points for Smart Taxpayers

As tax season rolls around, it's crucial for every taxpayer to make the most of their charitable contributions. Whether you're a seasoned donor or just starting to explore the world of philanthropy, here are six key points to help you navigate the ins and outs of maximizing your deductions.

  1. Understanding Charitable Donations: What exactly qualifies as a charitable donation? It's not just cash; donations can come in various forms, including property like furniture or art, used clothing, or even financial assets such as stocks. However, to be deductible, the donation must be made to a qualified charity by year-end and must be substantiated according to IRS rules.

  2. Maximizing Deductions: One strategy to maximize deductions is to bunch donations every few years. By combining donations into larger sums, taxpayers can surpass the hurdle of the higher standard deduction. For example, couples like Stacey and Dana can benefit from this approach, ensuring they make the most of their charitable giving while optimizing their tax situation.

  3. Utilizing Appreciated Investments: Donating appreciated investments, such as shares of stock or cryptocurrency held for more than a year, can be another effective strategy. By doing so, donors can receive a deduction for the asset's fair-market value without owing tax on the appreciation, subject to certain conditions.

  4. Exploring Donor-Advised Funds: Donor-advised funds (DAFs) are becoming increasingly popular for tax-efficient charitable giving. These accounts allow donors to bundle smaller gifts into one larger amount, taking a deduction in the year of the gift. Meanwhile, the assets can be invested and grow tax-free, though DAFs do come with associated fees.

  5. Senior-Specific Strategies: For donors aged 70 ½ or older with traditional IRAs, qualified charitable distributions (QCDs) offer an excellent option. By contributing IRA funds directly to charities, donors can enjoy tax benefits such as reducing adjusted gross income and minimizing Medicare premium surcharges.

  6. IRA Charitable Gift Annuities: Beginning in 2023, IRA owners can contribute traditional IRA funds tax-free to an IRA charitable gift annuity. These annuities provide income for life while benefiting a nonprofit organization, with the added advantage of counting towards the donor's QCD limit for the year.

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In conclusion, by leveraging these six key strategies, taxpayers can not only maximize their charitable deductions but also make a meaningful impact on the causes they support. Whether it's through thoughtful planning, utilizing tax-efficient giving vehicles, or exploring senior-specific options, every donation has the potential to create positive change in our communities. So, let's navigate tax season with confidence, knowing that our charitable contributions are not only making a difference but also optimizing our financial well-being. Together, we can build a brighter future for all.

For expert guidance in navigating the complexities of charitable deduction tax planning, look no further than Mark Sullivan Consulting. With over two decades of experience specializing in IRS federal tax controversy, audit, and appeals representation, Mark provides unparalleled expertise and personalized strategies tailored to your specific needs. Don't leave potential deductions on the table – trust Mark Sullivan Consulting to maximize your charitable giving while optimizing your tax returns.

Request a free consultation HERE with Mark W. Sullivan, EA .

About the author

Mark W. Sullivan, EA founded Sullivan Consulting in 1998. He specializes in federal tax controversy representation, appeals and consulting on behalf of individuals, businesses, law, and accounting firms nationwide. In addition, he has served as the consulting and expert witness in numerous civil and criminal cases in multiple federal district courts.

Mark has an unlimited Enrolled Agents license and is admitted to practice before the Internal Revenue Service based on his extensive experience as a Revenue Officer in New York, NY, St. Louis, MO and Washington, D.C.


Copyright 2024

Mark Sullivan Consulting, PLLC.

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

Additional references:

"How To Lower Your Tax Bill With The Charitable-Donation Deduction", Laura Saunders, The Wall Street Journal (April 14, 2024)


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