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A Guide to Smart Holiday Giving: The Financially Wise Way

As the holiday season draws near, we reconnect with the spirit of giving, compelled to share our blessings with those in need. Volunteering and supporting charities are more than just about spreading joy; they can also offer a chance to impact our communities profoundly. However, navigating the landscape of charitable giving while maintaining financial prudence can be a delicate balance amidst the festivities.

As a financial advisor, I experience the daily acts of generosity in my conversations with clients. Whether they’re contemplating donating their time, resources, or funds, they're always trying to optimize the impact of their contributions for the greater good.

In this blog, I'll explore how to take a financially savvy approach to charitable giving and describe four strategies that will give you the opportunity to make a meaningful impact without straining your wallet.


Time, Talent, Treasure

So often during the holiday season, we get caught up in the spirit of “giving”, but rarely stop to think of what giving actually means. 

Generosity doesn't always have to come in the form of a monetary donation. Volunteering time to an animal shelter, assisting at a homeless shelter, or providing guidance to someone in distress can be equally fulfilling and sometimes even more impactful. 

Whether you choose to donate your time, talent, or treasure, you’ll have the chance to make a lasting difference in both your community and your own sense of fulfillment.

Regarding monetary donations, while giving isn't solely about taxes and financial optimization, we advocate for an efficient approach to ensure that more funds reach your chosen charity and less are allocated to Uncle Sam.


What are the financial advantages of donating to charity?

Even though it isn't our initial goal, kindness often leads to unexpected rewards. Besides the joy it brings, charitable giving can also have financial benefits too.

It’s important to note before we move forward, that though giving is NOT just about taxes and financial efficiency, we believe it’s a good idea to approach it as efficiently as possible to ensure more funds get to your charity of choice and less going to Uncle Sam.


Four steps towards a financially savvy donation

While contributing to charities may seem straightforward, pausing and researching whenever money is involved is essential. Below, I've outlined four strategies to encourage you to donate thoughtfully and effectively to ensure the causes you support and your financial well-being benefit from your generosity.


1. Make informed charitable contributions

Charitable giving helps others, but it’s also essential to donate in a tax-efficient way. Understanding different strategies allows you to maximize deductions and give more to the causes you value most. 

  • Utilize Qualified Charitable Distributions (QCD)

Making a QCD from your IRA (if you’re over 70 ½), can be excellent for retirees as they can donate all or a portion of their annual RMDs to charity without incurring tax consequences.

  • Establish donor-advised funds (DAF)

DAFs enable you to give assets, take an immediate deduction, and allow the assets to grow in value until you’re ready to give. They can be excellent vehicles for year-round charitable efforts.

  • Optimize contributions

Bunching charitable donations within the same tax year helps take advantage of itemizing while donating appreciated assets like stocks or real estate allows deductions for their current value without capital gains taxes.

  • Donate appreciated assets
    Giving stocks, real estate, or other assets that have gained value straight to charities can get you a deduction for their current worth without facing capital gains taxes while increasing the value of your gift.


2. Document your giving

Always maintain records of your deductible donations, regardless of their size. 

  • For monetary gifts, acceptable documentation includes a bank statement, a credit card statement, or a receipt from the charity detailing the organizer’s name, date, and amount, with a canceled check.
  • If you contributed an automatic deduction from your paycheck through your employer, keep copies of your W-2 or pay stubs showing the amount and date of your donation.

In certain circumstances, you’ll need additional documentation such as: 

  • Making cash or property donations with more than $250.00

The IRS needs a written acknowledgment from the charity specifying your cash donation amount, any received items in exchange, and their estimated value. Ensure you receive this letter by the tax filing deadline for the year of your contribution.

  • If you deduct at least $500 worth of noncash donations

Complete Form 8283 when removing over $500 in donated items. If the items surpass a total value of $5,000, include an appraisal and the form.

Documenting your giving helps with tax benefits and promotes accountability, transparency, and effective financial planning. 


3. Select a reputable charity

Your donation, regardless of its size, holds the power to create a meaningful impact. However, charities vary in how they use donations, making it crucial to research their mission and programs. This ensures their impact matches your giving intentions.

Researching charities is easier now, thanks to the internet. Platforms like GiveWell gather data from the IRS and charities to provide unbiased ratings. They help you find charities aligned with your interests, allowing you to give confidently.

You can even go one step further, easily…

Because charities receive special benefits, like tax-exempt status, they must file a yearly tax return called Form 990 with the IRS. These forms are open for public viewing, allowing anyone to easily search online and explore any charity they're interested in— and they should.


4. Pick an organization that connects with you

Another way to make charitable giving meaningful is to pick one that resonates with you. Every charity has a mission and that mission typically connects with a significant experience or emotion. 

My wife Sonya and I have been drawn to a few organizations that we proudly give our time, talent, and treasure to:

The Humane Society promotes the humane treatment of companion animals and creates lasting human-animal bonds.

Naperville Rotary Charities has worked for over 110 years with other Rotary clubs from all cultures to exchange ideas, form friendship and professional connections, and create lasting change. They've worked to promote peace, fight illiteracy and poverty, promote clean water and sanitation, and fight disease to make a better world for everyone.

  • Gamechangers Foundation, National
    The Gamechangers Foundation set within spiritual environments pulls from experiences in Christ to bring recovery to the hearts, minds, and souls of those struggling with substance abuse while healing their marriage and families.
  • Fry Family YMCA, Naperville
    Whether it's through personal training, youth sports, Day Camp, or any of their core community services, the YMCA of Metropolitan Chicago plays for fun, and for progress.
  • Bridge Communities, Glen Ellyn
    Bridge Communities is a dynamic, grassroots, non-profit organization committed to transforming the lives of families facing homelessness through partnering with talented, resourceful individuals, and groups in our community. 


My colleague, financial advisor Josh Duncan and his wife Tammi, also have specific charities they expresses unwavering support to: 

The Rotary Club of Henry County has a global network of 1.4 million neighbors, friends, and leaders, volunteering their skills and resources to solve issues and address community needs. 

  • Operation Lunchbox, McDonough, GA
    Operation Lunchbox’s mission is to impact the lives of people by providing nourishment to families in need.
  • VHS Band Boosters, Venice, FL
    Donations to the VHS Band Boosters club helps the Venice High School Band program travel and perform across the United States, giving the students opportunities they otherwise wouldn't have.
  • Pregnancy Solutions, Venice, FL
    Pregnancy Solutions provides completely free care to women and men including free ultrasounds, hospital-grade pregnancy tests, and options counseling.


In conclusion

Whether you're contributing financially or investing your time, making the most of your impact is crucial. Utilizing your resources wisely amplifies the support for causes that matter most to you. If you're considering how to give back this holiday season, seek advice from F5 Financial. They can assist in crafting responsible donation strategies that truly create an impact.



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F5 Financial

F5 Financial is a fee-only wealth management firm with a holistic approach to financial planning, personal goals, and behavioral change. Through our F5 Process, we provide insight and tailored strategies that inspire and equip our clients to enjoy a life of significance and financial freedom.

F5 Financial provides fee-only financial planning services to Naperville, Plainfield, Bolingbrook, Aurora, Oswego, Geneva, St. Charles, Wheaton, Glen Ellyn, Lisle, Chicago and the surrounding communities; to McDonough, Henry County, Fayette County, Atlanta and the surrounding communities; to Venice, Sarasota, Fort Myers, Port Charlotte, Cape Coral, Osprey, North Port, and the surrounding communities; and nationally.

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Curt Stowers

Curt Stowers

Curtis Stowers helps individuals and families across the United States grow their financial assets, particularly in the Naperville, IL region. He is a Certified Financial Planner, holds a Ph.D. in Industrial Engineering from the University of Illinois, and is the founder of F5 Financial.