Giving Can be Good for the Heart and Your Finances

The holiday season can be a great time of year to review your financial situation to see if changes need to be made. As the year winds down, a financial review leads us to think about our tax situation and whether we should consider charitable contributions.  

Research has shown that giving money can make you feel better while helping others. A University of Oregon study found that the pleasure centers in the brain became activated when people decided to give money to charity. And since the holiday season is traditionally one of generosity, it can be a great time to consider making donations to a charity that aligns with your values.  

Gifting to charity might also help reduce the taxes you might owe. However, if you take advantage of the higher standard deductions today ($12,950 for single filer & $25,900 for joint), you get no tax benefit for making a gift to charity. But, if you make several years’ worth of donations this year, you might find it more advantageous to itemize your deductions—allowing you to take a larger gifting deduction than you would if you spread your giving over a longer period.

One way to accomplish this is to contribute to a Donor Advised Fund (DAF). A DAF is a charitable investment account that you set up at a public charity like Schwab Charitable. Once an account is set up, you can not only contribute contribute cash, but appreciated non-cash assets held for more than a year. This strategy can help you achieve greater philanthropic impact and help you reduce your taxes. The moment the asset is deposited into the account, the gift has been made and you avoid paying any tax on the gains of the asset. The decision about what IRS qualified charities should receive gifts can then be made later, even into future years. 

Under the SECURE Act of 2020, a Qualified Charitable Distribution, or QCD, remains a way to make a tax-free gift to your charity of choice using your traditional IRA. Consider making QCDs starting at 70½ to reduce the balance in your IRA. This gift reduces your income instead of increasing your deductions for the year. A higher income can increase your Medicare premiums and possibly create other tax issues.

How Do You Qualify to Make Qualified Charitable Distributions?

  • You must be 70½ years old or older at the time of the gift
  • Gifts must go directly from your IRA to the charity (and not to a Donor Advised Fund)
  • Gifts must come from a traditional or Roth IRA account
  • Gifts cannot exceed $100,000 per donor per year
  • You cannot receive a benefit in return for your gift, such as tickets to a gala

As with any financial strategy, the charitable giving approach that’s right for you will depend on your life goals and financial situation. The CERTIFIED FINANCIAL PLANNERTM professionals at Marshall Financial are here to help—not only at year-end, but year-round. Contact us to help you choose the best charitable giving strategies, set up a DAF, or advise you on making charitable gifts in conjunction with your RMDs.  


Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania.   This newsletter is limited to the dissemination of general information pertaining to Marshall Financial Group’s investment advisory services.  Investing involves risk, including risk of loss.  References to market indices are included for informational purposes only as it is not possible to directly invest in an index. The historical performance results of an index do not reflect the deduction of transaction, custodial, and management fees, which would decrease performance results. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any comparative benchmark index.

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