Episode 195: Maximizing the Impact of Charitable Giving with Melissa Joy

Ever thought about the power of your generosity? We celebrate Giving Tuesday with a deep dive into making your charitable contributions more impactful. Co-Host Melissa Joy, CFP®️ discusses building a solid donation strategy, pinpointing the organizations that tug at your heartstrings, and involving your family in this profound process. She also shares how you can leverage the tax benefits of philanthropy and how generosity triggers the release of feel-good chemicals that can add years to your life. Lastly, she shares the precious opportunity charitably giving provides to instill the values of generosity and philanthropy in our young ones. So, join us in this episode and let's explore the remarkable world of giving together. Step in and let's discover the joy and impact of purposeful giving this Giving Tuesday!

Resources:

• Visit the virtual headquarters for Giving Tuesday 2023.
• Read Pearl Planning blog, 10 Ideas for Giving.
• Read about the Health Benefits of Giving.
•  Here are Tips and Contribution Limits for Charitable Giving.
• Read about How Generosity Helps Kids Live Richer Fuller Lives. 
• Watch a webinar replay, Money Smart Charitable Giving.
• Listen to podcast episode 33 Charitable Giving with Laura Brownfield for more information on Donor Advised Funds.

Links are being provided for information purposes only. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Pearl Planning cannot guarantee that the information herein is accurate, complete, or timely. Pearl Planning makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Pearl Planning financial advisors do not render advice on tax matters. You should discuss any tax matters with the appropriate professional.

Data Sources: Capital Group, RIMES, Standard & Poor's.

Transcript

Speaker 1: 0:05

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and founder of Pearl Planning.

Speaker 2: 0:12

I'm Melissa Freidenberg, financial advisor. We dive deep into topics like work-life balance, financial planning, personal growth and the intricacies of the sandwich generation.

Speaker 1: 0:23

Tune in for money conversations that every woman needs to have. Hello everyone, welcome to the Women's Money Wisdom Podcast. It's Melissa Joy here today, and this episode is being released on Giving Tuesday, one of my favorite special days of the year where people are encouraged to make charitable gifts and donations in the holiday season. This year, I thought a great way to celebrate and honor Giving Tuesday would be to make it a focus of our episode this week and talk about how you can elevate your charitable giving. This episode is going to pair some age-old advice. It's going to talk about the benefits of giving and then also we're going to have some technical suggestions for how you can get more out of the gifts that you get charitably. And so, without further ado, here are five suggestions on Giving Tuesday to make your charitable gifts more worthwhile.

Speaker 1: 1:31

My first suggestion is to give with intention. Sometimes you just don't have time to consider making gifts and it's just at that checkout where you're asked hey, do you want to round up, to give to X, y or Z? Cause that you actually have a chance to reflect, and so if you could take a moment today and just consider the charitable giving that either you're doing now or that you would like to be doing. I think that would be time well spent With anything, including many of the things that we do in financial planning. We always like to remind you to have goals and when it comes to charitable giving, without that space and time to really think about what's important to you, then you can be left with a lot of intention but not a lot of purpose or strategy. So I really want people to think about how what you to think about, I should say, how you can really make more meaning with your charitable strategy. Some of you may already have this under control. There may be organizations that really matter to you and you feel like you're giving what you can afford to give or do, or what feels right to you and your family. But if you are someone who feels like they need to refresh their charitable strategy, if you're like many people who just don't have one, then take some time to consider whether you would like to spend time and do work on elevating your game, and that's my second step.

Speaker 1: 3:10

I want to talk to you about strategies that you can use to improve on your charitable gifting. So, in order to elevate your game, the first thing to do is to keep track. So even today, you've got about a month left in the year and for many of us we think of charitable giving based on calendar years. Then I would spend a little time and go back in your emails and see what donation receipts you have. Look back in the work that you've done maybe you've cleaned out your house and have made some gifts of objects, of household items or even bigger ticket items like a car, to charitable organizations and so make a list, right down what you did this year and maybe, if you tracked it last year or had to pull it together for your tax returns, look at last year as well, use any patterns and also reflect upon the gifts that you have made and how they impact you.

Speaker 1: 4:09

Perhaps an important gift for you is supporting organizations that matter to your family. This could be your church or temple or spiritual organization. This might be your kids' school. This might be an activity that's important to you or something in your community that really matters. And if they're those top kind of organizations that are right for you in your life today, ask yourself if you're doing the right amount, whether it's a gift of your time and effort, which, of course, could be deductible if you count mileage and things like that, or gifts of resources. It could be checks that you write and perhaps you haven't gotten around to them this year because you've been busy or they haven't had an event that usually you attend in order to make gifts.

Speaker 1: 4:58

But look at that list and then also reflect on organizations or causes that you've given to that may not be a fit anymore that you feel like might not be right for right now. And then, as you evaluate that list, if there are things that really rise to the top, that feel important to you, then consider combining gifts from other organizations that are smaller or less meaningful to you into a bigger gift for the organizations that really matter in your eyes. If you don't find a lot of organizations on the list I should say and it's important to you to start giving, then perhaps you could volunteer. Perhaps you could ask if they have any year-end tasks or they have opportunities to volunteer and start to explore organizations that could be potential giving partners for you over time. Another great way to consider making a gift is a planned gift over time. You might tell an organization hey, I plan to give you $500 per year for the next three years and I just wanted to give you a heads up, something like that and sometimes organizations even have programs I know for a church when there are capital campaigns, then they ask for gifts over time that can pay for bigger ticket items, and so, as you are reflecting on this list, I also encourage you to share it with your family or people that are important to you. Talk about it together, if you kind of have a shared pool of resources and really have some reflection to decide whether the gifting strategy that you have today is a good fit for you in your life, and then we'll be giving you some suggestions for how to elevate that gift on a personal balance sheet side in a few moments. So if you find that you really need to make some adjustments, then take some of the strategic and tactical suggestions that we have coming up and utilize those to help you out.

Speaker 1: 6:54

Okay, so all of us think about charitable giving, and when I get to number three, I want to talk to you about tax breaks. That's how to kind of cut Uncle Sam out of the loop, not have to pay as much in taxes and use your charitable gifts to lower your overall tax obligations. Now there are a few ways that you can reduce your taxes, but what I'll tell you right off the bat is that nowadays, there is a reduced opportunity for lowering your taxes versus the way it used to be, and the reason has to do with a part of our tax code that changed a few years ago with the Tax Cuts and Jobs Act. As of now, there's a much higher standard deduction than there used to be. In fact, for single taxpayers, or if you're married, filing separately, then your deduction is almost $15,000. In 2023, it's $14,600. If you're married couple, then your standard deduction is $27,700. And if you're ahead of household is $20,800.

Speaker 1: 7:57

So, with that elevated standard deduction, paired with reduced opportunity to write off certain things, especially state and local taxes, which are capped at $10,000, many of you aren't. Even if you're giving a significant amount, you're not going to touch that cap, especially for married couples. It's just getting close to $30,000 when you add up the items that you're able to deduct. As a reminder, the main things that you would be able to deduct would be your medical expenses, but they have to be a big percent of your overall income, also able to deduct state and local taxes, but again, as I mentioned, capped at $10,000. And you're able to deduct mortgage interest, although many of you were refinancing during 2020 through 2021. And so you have much lower interest rates, although those will likely creep into the equation for deductions, as we have more people that are buying houses at the higher interest rates that exist today. And then you add in your charitable gifts, so all of those would have to add up to more than those standard deduction amounts in order to lower your taxes. So keep that in mind.

Speaker 1: 9:13

What you can do is you can pull out your tax return from last year and you can see if you itemized or took the standard deduction. You could also look for many of you, you would do the calculations to make sure you shouldn't itemize, or your tax preparer would, and so then you could see how close you are to the level that you had the opportunity to itemize. And if you're getting close, then there's a few strategies you might want to consider. One would be to make a gift for a couple years or a few years all at once, because then every few years, you might be able to itemize. And if you're not looking to give the money right to the organizations right away, then you could consider using a donor advice fund. That's a fund that allows you to give a tax deduction at a specific period of time, but then the fund could be used either as investments or cash, and you could wait to kind of dole out the gifts to the charitable organizations that you care about over time. And, of course, there's a lot of technical details when it comes to a donor advice fund, although it's fairly straightforward and fairly approachable lower costs than many other charitable fancy strategies, I might say but we can provide details on donor advice funds in the show notes as well as in the tax brackets for charitable giving. Another thing I'd mention if you're in a very low tax bracket like you aren't making much money maybe you're a retiree and you're just not reporting much income there is a cap on how much you can, what percent of your income or your adjusted gross income you can write off, and so make sure that you are aware of those caps. Oftentimes the limit on cash contributions, for example, is 60% of your adjusted gross income. All of these items come into play, and so that's where we say we're not tax advisors, and definitely make sure to chat with your tax professional as well as your financial planner if you're thinking about doing a more sophisticated strategy Whether or though tax advantage strategy would be to let's say you're going to give $2,000 or $3,000 to your religious organization each year and you happen to have stock from the company that you work at or any type of appreciated stock that's in a taxable brokerage account.

Speaker 1: 11:32

You could give away, let's say that that money you'd owned it for more than 12 months and it had a gain. Then potentially, at some point in time you may pay taxes on it. That's a capital gain that you have from the difference between what you purchased it for and the price today. With that we'll see you next week gain could be given away to a charitable organization. If they sold the investment, they would not pay tax because they are a nonprofit and they don't have to pay taxes. That is another strategy that could be tax beneficial. Maybe you have something you wanted to write a check for $3,000 or $4,000, you own a stock that you would want to use to write that check but you don't want to sell it because you don't want to pay the 15 or 20 percent capital gain tax that comes along with it for many taxpayers. That would be a way where you could give away a future tax liability with your gift to charity, you don't have to itemize to get that tax benefit, although if you are itemizing it's even more advantageous. That's another consideration for taxes.

Speaker 1: 12:38

Then I know most of our listeners are women who are in their 30s, 40s and 50s. This next strategy probably doesn't apply to you, but let's give it a shout out to our listeners who are in this age group. If you are over age 70 and a half which, like I said, maybe a few of our listeners, but also I know many of you are stepping in and helping out with your parents' finances, whether they ask for your help or you just need to If they make charitable gifts and have retirement accounts, especially IRAs, and are over age 70 and a half, you can make a gift by giving directly from the IRA or the retirement account into the charitable organization, and if the check doesn't pass through your hands, then you don't have to report that distribution or withdrawal on your taxes. It counts as a distribution. It could go to satisfy your required minimum distribution if you're over age 72 or 73, I should say. And also, though, you don't have to report those taxes. So that's another strategy that can reduce your tax bill and, like I said, I know that most of our listeners are not in that age bracket although shout out to those who are. But also we know that you may be able to bring this strategy to elders that you care about, to help them know that the strategy is possible. So, even though the standard deduction is what most of you take the majority of Americans do standard deductions there are still some tax strategies that apply. And keep an eye on tax law over the next few years, because this rule is set to expire in 2025. And so we'll have to see where things go and whether the opportunity for itemized deductions changes over time.

Speaker 1: 14:33

Okay, so we've talked about some of the technical pathways of giving, but I just wanted to remind you of the power of giving, and I'm gonna link to an article there's a ton of research out there, but just a nice, general, good vibe article that comes from the Cleveland Clinic that talks about how giving is good for your health. Giving actually releases good chemicals into your body, such as serotonin, dopamine and oxytocin. It gives you purpose and it allows you for an opportunity for joy. The opportunity to help others has proven scientific benefits, whether they're short term, such as lower blood pressure and less stress, as well as long term, such as those that tend to give tend to have longer life spans. I want you to remember this, I want you to appreciate it and make sure that you breathe as you give and take in the benefits that you should be receiving with your charitable gifts. Know that if you have the intention and develop a purpose and more intentional giving strategy, that can have some long term benefits that are medical benefits and health benefits. I want to celebrate that and offer you that opportunity. If you're feeling low and lonely in the holiday season, this could be a way for you to integrate some opportunities for good feelings, some opportunities for purpose, which tend to be very powerful in a person's mental health. Our number four recommendation on Giving Tuesday is to recognize and appreciate and celebrate the scientific and health benefits of giving. And then, number five, I strongly encourage you to consider giving the gift of philanthropy across generations.

Speaker 1: 16:35

So many of you who are listening are raising kids or grandkids, and studies tend to show that generosity can help kids with purpose and can help them see value in life. It can help them to see different walks of life, and early giving can be a very powerful preparation tool for those that are likely to inherit wealth over time. So, whether you're listening and thinking about your adult or young adult children, or if you're thinking about your school-aged children, please consider sharing, sharing the gift of giving with your family. That share could be something as little as a discussion on Giving Tuesday and what it means. Or perhaps you would encourage your kid to give a portion of their allowance to an organization that they care about. It could be the humane society or a homeless shelter, and if you really wanted to up your game, you could volunteer as a family in an organization like that, whether it was adopting a family around the holidays or taking a shift at the local animal shelter, and talk about the purpose and power that money can have. This can be a great strategy to provide shared goodwill to have those health benefits that matter to you and also to start to prepare your kids for hopefully living a life that's wealthy themselves.

Speaker 1: 18:12

And so, as you contemplate the value and the impact of Giving Tuesday, don't forget to share it with your family, and that can be up and down the generations. One time one year, our family did a visit to a homeless shelter to drop off stuffed animals that my daughter, as a five-year-old, really wanted to share with kids in the shelter. In other years we've done research as a family to determine whether to make a bigger gift or for each person in the family to pick their own organization. You never know what's going to come up in conversations when you start to work on this, but you see a ripple effect that's quite positive when you hear your kids discussing it with other kids or their teachers, and you can build upon that and teach your kids about both wealth and generosity in a way that will be a lesson for them for ongoing and into the future.

Speaker 1: 19:14

So enjoy Giving Tuesday. I hope you can appreciate and celebrate the day as much as I do by making a few gifts that I'd already intended to make for the year and perhaps expanding and multiplying those gifts when you feel like there's room. If you have any questions about more complicated strategies that come with charitable giving, don't hesitate to reach out to us, but also make sure to check the show notes, where I'll include some great articles that help you get started on your path to giving. Have a great week and enjoy the beginning of the holiday season.

Speaker 2: 20:05

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in our conversations, please take a moment to like, follow and subscribe wherever you're tuning in from. It helps us continue to bring these valuable insights every week. Head over to women'smoneywisdomcom. There you'll find tools, tips and a supportive community to help you gain financial confidence.