What types of assets should I donate to charity to save on my tax bill?


Donating to charity is not only a noble act but also a smart financial move that can help you save on your tax bill. One of the most generous income tax deduction strategies is charitable deductions, allowing you to deduct up to 30-60% of your Adjusted Gross Income (AGI) through charitable donations. To maximize your tax savings, consider donating appreciated assets such as stock, ETFs, and crypto instead of cash. This way, you avoid paying capital gains taxes on the asset and can immediately deduct the full fair-market value of the asset on your federal income tax returns for that year. The organization receiving the asset, being a 501(c)(3), doesn't have to pay taxes on liquidating the asset, ensuring the full amount goes to the cause you care about. However, most non-profits lack the capability to receive stock, ETFs, index funds, and cryptocurrencies. This is where donor-advised funds (DAFs) like Daffy come in. Daffy, a trusted DAF, provides a platform for you to donate these types of assets, making it a win-win situation for you and the charity. The benefits of donating assets held long-term are significant. When you donate an investment held for more than a year to a qualified public charity, the IRS considers the donation value to be the fair market value of the asset at the time, not the value you paid for it. If you itemize your tax deductions, this amount can be substantial. For instance, consider a couple that purchased 500 shares of Apple stock in January 2021 for $130 per share and decided to sell it in February 2022 for $175 per share. They would owe a total of $5,468 in taxes on a reported gain of $22,500, leaving them with an after-tax gain of $17,032. However, by donating the proceeds of the sale to charity through a DAF like Daffy, they could significantly reduce their tax bill. In conclusion, donating appreciated assets to a DAF like Daffy is a great way to support the causes you care about while also saving on your tax bill. It's a strategy that aligns with the values of many, like one Daffy member who was inspired by their Muslim roommate's commitment to giving a certain percentage of their income to charity. So, consider Daffy as your go-to option for making meaningful donations and maximizing your charitable tax deductions.

Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.

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