Many would agree that helping others is one of the most important principles to live by. Acts of generosity reflect faith, build stronger communities, and support causes that matter. However, giving is most impactful when done wisely, blending charitable contributions with a thoughtful, well-structured financial plan.
This blog from PAX Financial Group explores how giving can benefit both your heart and your wallet. Also, we’ll discuss some tax benefits of giving and key strategies to maximize impact and balance financial security.
Tax Benefits of Giving
Charitable giving doesn’t just support important causes—it can also offer valuable tax advantages. Understanding tax-efficient giving strategies can help you make the most of your contributions.
Donor-Advised Funds (DAFs)
DAFs provide a structured and tax-efficient way to give to charitable organizations while maintaining flexibility over when and how donations are distributed. These funds act as a charitable investment account, allowing you to contribute assets, receive an immediate tax deduction, and recommend grants to your chosen nonprofits over time.
How DAFs work:
- Make a contribution – Donors contribute cash, stocks, real estate, or other appreciated assets to a donor-advised fund. These contributions are irrevocable and cannot be taken back once donated.
- Receive an immediate tax deduction – Since contributions to DAFs are considered charitable donations, they may be eligible for a deduction in the year they are made. This can provide tax advantages, particularly in high-income years.
- Grow donations tax-free – Once in the DAF, assets can be invested and grow tax-free, increasing the potential size of future charitable gifts.
- Distribute grants over time – Donors can recommend grants to charities at any time, allowing for strategic giving rather than one-time lump-sum donations.
One key benefit of DAFs is that you can choose to give anonymously, if preferred, rather than making direct donations to organizations. Working with a PAX San Antonio financial advisor can help determine how a DAF may fit into your broader giving strategy.
Qualified Charitable Distributions (QCDs)
For individuals 70 1⁄2 or older, a QCD allows up to $100,000 per year to be donated directly from an IRA to a qualified charity. For married couples filing jointly, each spouse with an IRA can donate up to $100,000, potentially doubling the charitable impact while reducing taxable income.
QCDs count toward Required Minimum Distributions (RMDs) but are excluded from taxable income, making them a tax-efficient way to give while preserving other retirement assets.
Key considerations for QCDs:
- Eligible accounts – QCDs must come from a traditional IRA; other accounts like 401(k)s must first be rolled over to an IRA to qualify.
- Qualified charities – The receiving organization must be a 501(c)(3) public charity; private foundations and donor-advised funds do not qualify.
- Direct transfers required – Funds must be transferred directly from the IRA custodian to the charity to count as a QCD. Withdrawn funds given separately will be taxed as income.
Charitable Trusts
Charitable trusts provide structured ways to give while maintaining control over assets. There are two common types:
- Charitable Remainder Trusts (CRTs): Provide income to the donor or beneficiaries for a set period, with the remaining assets donated to charity.
- Charitable Lead Trusts (CLTs): Support philanthropic causes for a designated period, after which the remaining assets go to heirs.
Both options can provide tax benefits while ensuring ongoing financial support for charitable organizations. PAX’s team of San Antonio financial advisors have extensive experience with charitable giving strategies and can help determine the best ones to integrate into your financial plan.
Balancing Generosity and Security
Giving to meaningful causes is a vital part of faith-based financial planning, but it’s equally important to maintain economic stability. Striking the right balance allows you to give generously while preserving your long-term financial health.
Before making large contributions, consider the following:
- Your retirement needs: Have you saved enough to maintain your lifestyle and cover unexpected expenses?
- Emergency savings: A well-funded emergency account prepares you for unforeseen financial challenges.
- Sustainable giving: Establishing a structured plan allows for consistent contributions without compromising your financial well-being.
Generosity is a core principle of faith, and with the right approach, charitable giving can be both impactful and financially responsible. Whether you’re looking for ways to give strategically or focused on retirement planning in San Antonio, PAX is here to guide you every step of the way.
Faith-Based Giving Goals
For many, charitable giving is not just about financial contributions and tax benefits—it’s about supporting causes that reflect your faith and values. Thoughtful giving allows you and your family to make a meaningful difference while staying true to your beliefs.
To give with purpose, consider:
- Identifying key causes: Choose organizations that align with your faith and mission, whether it’s supporting churches, nonprofits, or community programs.
- Setting a giving plan: Whether through recurring donations, legacy gifts, or structured giving vehicles, having a plan helps create consistency.
- Exploring tax-efficient options: Using tools like donor-advised funds, QCDs, or charitable trusts can help maximize your giving potential while maintaining financial stability.
Including faith-based giving in your financial plan can help create a lasting legacy. Balancing generosity with financial security ensures your contributions stay impactful and sustainable.
PAX’s San Antonio Financial Advisors Can Help
PAX Financial Group specializes in faith-based financial strategies that help families manage resources with both heart and wisdom. Our team brings over a century of combined experience, delivering personalized guidance grounded in a steadfast commitment to Judeo-Christian values.
How we can help:
- Develop customized charitable giving strategies that fit your financial situation.
- Assist with tax-efficient giving tools to maximize impact.
- Support your retirement planning in San Antonio, helping you secure your future while making meaningful contributions.
Giving with purpose is possible with the right approach. If you’re looking to retire in Texas and incorporate charitable giving into your long-term financial plan, PAX is here to assist.
Contact us today to speak with a San Antonio financial advisor and explore charitable giving strategies that support your values and goals.
