The Right Ways To Donate: Safe And Tax-Efficient Strategies to Increase Your Charitable Giving

Charitable giving is a great way to bless others and reap some benefits for yourself in the process. 

In the U.S., most gifts to registered charities are tax deductible. Often, however, investors aren't quite sure how to make the most of the current tax law when they're planning their charitable giving.

The rules around tax benefits can be complex. So it's always wise to consult your tax professional in this area. Nevertheless, the guidelines below can help you give wisely this tax year.

What Is Christian Charity?

As a Christian, the act of charity (or generosity) is giving that benefits people in need and honors God. The Bible frequently mentions helping those in need. 

In Acts 9:36, the church recognized Tabitha for her extraordinary generosity. 

The apostle John wrote in I John 3:17-18, "If anyone has material possessions and sees his brother in need but has no pity on him, how can the love of God be in him?"

And in Matthew 25:31-45 Jesus specifically stressed the importance of living out our faith in our daily lives and helping others in need. "‘Come, you who are blessed by my Father; take your inheritance, the kingdom prepared for you since the creation of the world. For I was hungry and you gave me something to eat, I was thirsty and you gave me something to drink, I was a stranger and you invited me in" (25: 34-35). Reminding us in verse 40 we are all children of God “The King will reply, ‘Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me.’’” (25:40).

Keep in mind, giving is not exclusive to our finances, but can include our time, talents, and finances.

Is all giving, Christian giving?

Not exactly. To be distinctly Christian, charity needs to include the following five distinct components.

Christian Charity is Shaped by the Life and Teachings of Jesus Christ

As a Christian, giving isn’t necessarily about the tax benefit or the good feelings associated with being generous. Our goal is to love like Jesus did — in word and deed — showing respect and compassion to people living on the margins of the world.

The New Testament is full of examples where Jesus showed he cared for the poor, and let us not forget Jesus gave the ultimate gift (His life) for our sins. “For you know the grace of our Lord Jesus Christ, that though he was rich, yet for your sake, he became poor so that you through his poverty might become rich.” (2 Corinthians 8:9)

Christian Charity is Rooted in Gratitude

We give to others because we are grateful for what God gave to us.

In the book Money, Possessions, and Eternity, Randy Alcorn wrote, “Giving is a response of the heart triggered by God’s grace. We give because God first gave to us. Karl Barth said it beautifully: “Grace and gratitude belong together like heaven and earth. Grace evokes gratitude like the voice an echo. Gratitude follows grace as thunder follows lightning.” Our giving “doesn’t come out of our altruism - it comes out of the transforming work of Christ in us.”

Christian Charity is Redemptive

Christians don't treat those who are less fortunate like projects. We recognize the image of God in every person. Our intention in giving is to restore people to the life God intended us all to live. 

We believe that everyone needs redemption, and redemption comes from God. Therefore, we can give as an example of God's generosity to us in the belief that our gifts are a part of His Kingdom story and can help transform and redeem others.

This theology of giving helps keep us from a charity that is cynical or superior. 

Christian charity is a blessing to both donor and recipient.

Proverbs 19:17 says, "Whoever is generous to the poor lends to the Lord, and he will repay him for his deed."

Christian theology teaches that God rewards generous people. This does not mean this “reward” comes in the form of money, possessions, or even circumstance, but often in the transformation of our hearts.  Have you met a generous person who was persistently unhappy? Probably not. They likely still experience times of hardship, sadness, or depression, but their lives are not defined by those emotions. A generous life can be a joyful life. 

Giving can provide you with a sense of purpose and meaning, a way for you to honor God and take part in His story as well as benefit others  

Jesus said, “It is more blessed to give than to receive” (Acts 20:35). That could be because when we give, we have the ability to bless God, ourselves, and the recipient.

Christian charity should be transparent and accountable. 

The world of Christian charities is not always well regulated. Unfortunately, you cannot trust every organization that wears a faith-based label. 

You can, however, do your research. Is the organization a member of the Evangelical Council for Financial Accountability (ECFA)? What rating do they have with Charity Navigator?

These external agencies are not guarantors of credibility, but they can provide a basic metric for determining if an organization is handling its resources wisely.

If you plan to give a substantial gift — anything five figures or more — it can be a good idea to talk with your financial advisor and with a representative from the organization. A solid CEO or development director can let you know how they will use your gift and what impact it will make. They can also share how they will measure your gift's impact. Knowing the metric for success is an important part of determining which charity you will support.

5 Tax-savvy Charitable Giving Strategies

In the U.S., you can deduct most charitable gifts from your taxable income. Almost every taxpayer knows that, but they often don't know all their options for giving. How can you make the most of your charitable giving on your taxes?

1. Give Through a Donor-advised Fund

A donor-advised fund is a giving account set up for the purpose of making charitable contributions and giving assets to charities you care about. 

When you fund a donor-advised fund, you may qualify for an immediate tax deduction. In addition, if you choose to invest the money in the fund it grows tax free. You can continue to make tax-deductible donations to the fund over time and support mission-driven organizations long into the future. 

2. Donate Appreciated Securities Instead of Cash

Donating appreciated securities is one of the most tax-efficient ways to bestow a gift. If you own stock that has appreciated for more than a year, you can save big on capital gains tax.
You’ll never pay tax on this gain and you can still deduct the full fair market value of your donation up to the amount the IRS allows. If you aren't sure where you want to give your assets yet, consider donating the appreciated stock to your donor-advised fund.

3. Give Directly from an IRA if You're Over 72

Once you reach the age of 72, you must begin to make annual withdrawals from your IRA (referred to as the Required Minimum Distribution). One way to do so is simply to donate your required distribution amount directly to charity. 

You can deduct the amount withdrawn up to $100,000, so neither you nor the charity will pay taxes on the donation. If you want to leave money to an organization in your estate plan, donating an IRA is one way to do so.

4. Find Out if an Indirect Gift Could Benefit You

Would you rather give to an individual than a charity? Maybe you'd like to help a family member or friend in need. That's a wonderful way to serve others, but be aware that if you make a gift to someone, that gift could be taxable depending on the type and amount of the gift.

This often includes making an indirect gift. For example, if you're considering paying off someone's credit bill or mortgage instead of giving them cash.  Talk to your wealth management advisor and your tax professional about your options — and assume nothing until you've discovered the IRS regulations that apply to your situation.

5. Consider Making a Planned Gift

A planned gift is one that is promised — or planned — now but actually made later, usually after the sale of a business or at a donor's death. Done properly, planned gifts can benefit the donor, their heirs, and the charity. 

It's wise to consult with your financial advisor, estate attorney, and the charity's planned giving officer about the best planned giving options for you. 

Strategic Generosity: How to Choose a Charity

With more than 1.54 million charitable organizations in the U.S., how can you choose what charities to give to?

Know When Philanthropy Succeeds (and when it doesn't)

Philanthropy succeeds when it accomplishes something. 

Well-organized, mission-focused charities can accomplish great things with your gifts. These organizations know what they want to accomplish, have the tools and vision they need, and know what metrics they will use to measure success. 

Picking a competent charity is key to philanthropic success.

Develop Clear Charitable Objectives

Know your mission. 

Why are you giving? What do you want to accomplish? What's your legacy going to be? You may want to discuss these questions with your spouse, trusted advisor or friend, and of course ask God what He would have you do. 

Once you know your mission, you can direct your giving toward organizations that can help you achieve your philanthropic dreams.

Choose Charities that Align with Those Objectives

Your mission should be clear from your checkbook. 

You will give — and likely give generously — when you believe in an organization's mission, vision, and values. Rather than scattering your philanthropic dollars, consider focusing them on a few missions by investing in a small, well-vetted portfolio of non-profit organizations. 

Ask the Lord to open your eyes to a particular charity or ministry, or to place a specific need or cause on your heart.

Evaluate the Right Metrics of Effectiveness

It's important to have accurate and up-to-date information about the projects you fund. 

Ask the organization for regular updates — not just financial information but also data about the people being served. Find out what success looks like, what the timeline is, and how the budget vs actual spending is shaping up. 

Find out what the organization considers success, and then ask yourself if you agree before you give.

Seek Wise Counsel on Where and How to Give

A Christian wealth management professional can help guide your philanthropic journey. 

Consider talking with one of our advisors at Cooke Wealth Management. We love helping people make a difference in the world for Christ and His kingdom. 

Call us today to set up an appointment.