Tax Planning and Giving: What to Consider When Making a Difference

Giving to causes you care about is a great way to make a difference, but did you know that a little planning can help you give more effectively while also potentially helping your finances? Whether you’re donating cash, stock, real estate, or even cryptocurrency, understanding how taxes factor into your giving can help you make the most of what you give.

By thinking carefully about your giving, you can help make sure your generosity matches not only your personal values, but also helps you achieve your financial goals. Here are some things to keep in mind:

If you expect to incur a significant financial gain, like selling an investment or a business, consider planning your charitable donations ahead of time. This may help reduce the taxes you owe while maximizing the amount you can give to the causes you care about.

One of these options is called “bunching,” which means combining multiple years’ worth of charitable donations into a single year. This approach may help you qualify for a tax deduction that you may not have received otherwise. A donor-advised fund (DAF) can also be a useful tool, allowing you to set aside money for charity now and decide later which organizations you want to support.

If you’re thinking about gifting assets to family members or loved ones, there are a few things to consider:

• Gifting stocks vs. cash: Giving stocks that have increased in value instead of cash may offer some tax advantages. However, if the stocks have lost value, it could be better to sell them first and then gift the recipient the cash.
• Covering education or medical costs: Did you know you can pay tuition or medical expenses for someone else without it counting toward your gift tax limits? This is a great way to support loved ones without dipping into your lifetime tax exemption.
• Contributing to a 529 plan: If you want to help fund a loved one’s education, a 529 savings plan is a tax-friendly way to do so. In some cases, you can even contribute multiple years’ worth of gifts at once, making it an efficient way to invest in their future.

Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.

Many people start thinking about charitable giving only at the end of the year, but integrating your giving into your overall investment plan can help boost your impact year-round. If you’re planning a major financial move, talking to a financial advisor beforehand can help you take advantage of tax-saving opportunities while ensuring your gifts have the biggest possible impact.

Keeping in touch with your advisory team throughout the year can also help you stay informed about tax law changes so you can adjust your strategy as needed.

Strategic giving isn’t just about helping reduce taxes; it’s about making your generosity go further. By working with a team of advisors, you can create a plan that reflects your values, supports the causes you care about, and helps enhance the impact of every dollar you give.

Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.