How Charitable Donations Work

November 28, 2022

Charitable giving is a great way to support causes that are important to you and can also provide tax benefits. There are various options for making charitable donations, including writing a check, using required minimum distributions (RMDs), and donating appreciated stock.

Writing a check to a charity is perhaps the most straightforward way to make a donation. Depending on your adjusted gross income, this type of donation may be fully or partially deductible on your tax return. If you have a required minimum distribution (RMD) from a retirement account, you may also be able to donate part of your RMD directly to a charity. This allows you to fulfill your RMD obligation while also avoiding paying taxes on the distribution and supporting a good cause.

Another option for charitable giving is donating appreciated stock. If you have a brokerage account, you may have stocks that have increased in value since you bought them. Rather than selling the stock and paying taxes on the profit, you can donate the shares directly to a charity. This allows you to avoid paying taxes on the stock's profit and still support a cause that is meaningful to you.

Overall, there are various ways to make charitable donations that can be beneficial for both the donor and the recipient organization. By considering your financial situation and charitable goals, you can choose the giving option that works best for you.


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