1199706305

Key takeaways

  • The practice of charitable giving is a time-honored tradition going back centuries that, in present day, continues most commonly during what is known as Giving Season during the last two months of the year.
  • Giving can help lower your tax burden, while enabling you to support causes dear to your heart.
  • Donor-advised funds provide you with the opportunity to make contributions to many charities over an extended period.

Contributors

Andrew Berry

The end of the year is a time for reflection and renewal – and for giving. The practice of charitable giving is a time-honored tradition going back centuries that, in present day, continues most commonly during what is known as Giving Season during the last two months of the year. There are many reasons people feel a philanthropic call to action, each with their own set of benefits. Here are three common motivations for making gifts during Giving Season.

Lessen your tax burden, regardless of what tax bracket you fall into

Many choose to give because of the tax benefits they might receive.

“Generally, a donor will get an income tax deduction equal to the fair-market-value of assets they give to charity,” said Adam Frank, Head of Wealth Planning and Advice for J.P. Morgan Wealth Management. “If someone contributes long-term appreciated assets held for over a year, such as stocks, mutual funds, or other assets, they can also avoid paying tax on the built-in capital gain. You have to itemize your deductions to get the full benefit, but you can still avoid capital gains tax on contributions of appreciated assets even if you take the standard deduction.”

However, it’s important to remember that there is a limit to the amount you can deduct from your tax bill on an annual basis, based on a percentage of your adjusted gross income (AGI) for the year.

For more information, contact a tax professional.

“Even clients who are giving money to a cause they’re passionate about may still want to be as tax efficient as possible.”

Go the extra mile for missions and charitable goals near and dear to your heart

People will often give because they have causes they care about, or they are moved by issues that are happening around them.

“Both approaches are valid,” said Maria Alejandra Oltra, a Senior Philanthropy Advisor for J.P. Morgan Private Bank. “You can give to causes that are ‘timeless’ – things like education, health care or culture, for instance – and you can give based on circumstances or discussions; for example, natural disasters, conflict or racial equity.”

Either way, Giving Season is the time when non-governmental organizations (NGOs) are heavily fundraising because they know donors are thinking about year-end tax planning and making financial decisions based on their annual incomes and how much they have left to give.

“There’s also a spirit of starting a new year. So if you give an organization money, then they’ll be able to do new things. The dynamic of starting a new year is guiding a lot of that,” Oltra said.

Enhance your legacy for future generations

Donor-advised funds provide you with the opportunity to share your values and desire to support organizations with your next generations. Best of all, they allow you to make contributions to many charities over an extended period.

“Many times people want to give a certain amount of money, but they don’t want to give that much money to one specific charity right away,” said Frank. “People can create charitable vehicles for their charitable gifts that allow them to designate money for charitable purposes, but not have to choose the end charity right away, potentially creating a philanthropic vehicle for themselves and their families.”

Specifically, donor-advised funds are a great option for those who want to create a legacy for future generations. They are vehicles where your charitable funds can appreciate, generate income and grow income-tax-free over time. Best of all, you don’t need to choose the charity to donate to immediately. You can wait as long as you want to distribute the money, and have your children and grandchildren be involved in the process.

“Even though people are often motivated during Giving Season by their year-end tax planning, if they don’t know what charities or causes they ultimately would like to support, they could make their philanthropic gifts into a donor-advised fund (or a private foundation) and choose their end charities over time,” Frank said. “Contributing to a donor-advised fund can also make tax reporting easier if you itemize your deductions.”

For questions about giving and/or donor-advised funds, please reach out to a J.P. Morgan Advisor.

Connect with a Wealth Advisor

Reach out to your Wealth Advisor to discuss any considerations for your current portfolio. If you don’t have a Wealth Advisor, click here to tell us about your needs and we’ll reach out to you.

Connect now

 

IMPORTANT INFORMATION

This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.