Penney: Tools to improve your charitable giving
Published 5:00 am Sunday, March 30, 2025
- Kyle Penney
I bought my first set of Craftsman tools when I was a teenager. I mowed yards and had a go-kart, so there was always something in need of repair.
I first purchased one of those cheap tool kits from the discount bin at the local hardware store, but those tools were low-quality and quickly broke. Craftsman tools were more expensive, but they fit right, were very durable, and had a lifetime warranty.
I still use those tools today. Over the years I have added various specialty tools to my collection to handle specific projects such as plumbing and car repairs.
Having the right tools can resolve a problem quickly and efficiently. On the other hand, not having the exact tool for the job, can require significantly more effort and may not get the job done at all.
With that lesson in mind, I would like to share some tools and tips that have the potential to significantly improve your charitable giving. The following three tools are used so regularly in our daily work at East Texas Communities Foundation, that I often take for granted that not everyone knows they exist or how to use them.
The first tool to improve your charitable giving is to contribute gifts of appreciated assets rather than cash, whenever possible. When you make a gift of appreciated assets, you have the potential to avoid paying taxes on the gain you have experienced since you first purchased the asset.
The most common gift of appreciated assets we receive at ETCF is appreciated stock. As an example, when you make a direct gift of stock with a market value of $10,000, that you originally bought 10 years ago for $2,000, you can avoid paying taxes on the $8,000 gain in value you would owe if you sold the stock yourself and gifted the cash proceeds. Many charities are set up to receive gifts of stock and other publicly traded securities, but if they are not able to handle such a gift, ETCF can probably help.
As a side note, if you really love the stock and want to keep it in your portfolio, make a direct gift of stock to charity and use your cash to purchase the same stock at the current value to keep in your portfolio.
The second tool to improve your charitable giving is to make a direct gift to charity from your IRA. If you are age 70 ½ or older, the tax code allows you to make a distribution to charity directly from your IRA and avoid receiving the distribution as taxable income.
Money contributed to a traditional IRA during your working years is deducted from the income on which you pay taxes, so it goes in tax-free. Because you didn’t pay taxes when the money went IN to your IRA, the Federal government is expecting you to pay taxes on the income as you take distributions OUT of your IRA in retirement. The IRA Rollover provision allows you to make qualifying charitable distributions (QCDs) of up to $108,000 to charities in 2025.
There are certain rules that must be followed, so check with your IRA administrator to make sure you don’t jeopardize the tax savings. There are five different types of charitable funds at ETCF that can receive QCDs, despite the fact that donor-advised funds don’t qualify, so we can help you navigate the process and maximize your charitable giving.
Finally, the last tool that can help you improve your charitable giving is a donor-advised fund. A donor-advised fund (DAF) is like having a charitable checking account, with certain caveats. A charity such as ETCF, Fidelity Charitable or National Christian Foundation can receive a contribution to establish a DAF, then assist you with making grants to qualifying charities over time.
Some of the key reasons a DAF at ETCF can help improve your charitable giving include: 1) the ability to easily accept contributions of appreciated stock, 2) tax free growth from the investment of your contribution while you are waiting to distribute it to charities, and 3) having the expertise of a local foundation staff to help you reach your current and long-term charitable giving goals.
If you think any of these tools are intriguing or might be able to help you improve your charitable giving, we would love to have a discussion with you to help you maximize your support for your favorite local charities. Perhaps using one of these helpful tools is your next best opportunity to Give Well.