Giving and Saving Green

The end of the year 2024 is less than two months away. Between holiday celebrations, many people are also thinking about donating to their favorite charitable organizations before Jan. 1, 2025.

Georgia Gwinnett College (GGC) Dr. Benjamin Akins, associate professor of legal studies and taxation, said there are tax implications at the end of the year for many people to consider, and donating cash or property to a non-profit organization to help reduce their tax bill might makes sense.

Most people take the standard deduction allotted by the Internal Revenue Service (IRS) which is $14,600 for most single filers and $29,200 for most married couples who file together. Then there are those who are what Akins calls itemizers.

"This group of people itemize their deductions because it exceeds the standard deduction allowed by the IRS," he said. "By taking the time to itemize allowable deductions, they can claim a bigger deduction on their income and pay less in taxes."

For those who itemize, they might consider increasing their charitable giving to offset bumps in their household income.

One scenario of people experiencing an increase in income involves senior citizens.

"The IRS requires seniors with certain retirement accounts to take a required minimum distribution (RMD) from their 401k or IRA accounts when they reach a certain age so that it can be taxed," said Akins.

For those in the workforce, a few scenarios may result in owing more in taxes.

"If you get a bump in your income because of a bonus, promotion or raise, then you need to take that into account when it comes to your taxes," he said. "And if you itemize your tax deductions, you may want to consider donating part of that bonus or raise to offset your tax liability."

There is a lesser-known type of fund that can help people increase their tax deductions and support their favorite charities.

"It's called a donor advice fund (DAF), and most major brokerage firms offer these," Akins said. "You can simply direct a sum of money to a DAF and claim your tax deduction in that same year. You do not, however, have to decide upfront where to donate the money. You can take your time in deciding which charity or charities will benefit from your contribution to that fund over time."

Besides cash, many charities will also accept property, stocks and other forms of investments.

"If you decide to donate appreciated stocks to a charity, you will likely not have to pay taxes on any of the gain like you would have had to do if you would have sold the stock and then given the proceeds to the charity," he said. "The same principle would apply to donating other investment property, like land."

Tax savings aside, Akins said the relationship between wanting to give and the needs of non-profit organizations align perfectly at the end of the year.

"The weather gets colder and charitable organizations are looking for items to help those in need, and the holidays can be lonely times for people who in turn may need extra mental health support,"
he said. "People donate to organizations that align with their passions or interests."

Akins added that before donating to a charitable organization, it's wise to be sure that charity can receive donations that are tax-deductible.

"The IRS keeps a list of organizations that you can donate to and receive a tax deduction," he said. "One exception to that list would be religious houses of worship. They qualify automatically, and in fact, aren't required to register with the IRS."

Whenever you decide to donate to a charity, Akins said that keeping records is important should the IRS decide to look closer at itemized deductions.

"Only claim deductions on what you can prove," he said.

Dr. Benjamin Akins has been a full-time faculty member with the School of Business since 2012. He teaches courses in the areas of business law and income taxation. Akins previously lived in Washington, D.C., where he served as an attorney with the Office of Chief Counsel for the Internal Revenue Service. During the first half of his career with Chief Counsel, Akins worked with the Treasury Department to develop policy relating to non-profit organizations. As part of this role, he drafted regulations dealing with the relationship between the government and houses of worship. He also worked on guidance relating to the role of exempt organizations involved in prohibited tax shelter transactions. Akins spent the latter half of his tenure with Chief Counsel working as a litigator in the agency's Large Business & International Division. In this capacity, he served as legal counsel for the IRS during audits of large corporations, and he also represented the government's interests in Tax Court.