Booker T. Washington once said, "Those who are happiest are those who do the most for others." In 2022, Americans gave $499.33 billion to charitable organizations, making America one of the most generous nations in the world. The benefits of charitable giving can even go beyond helping others. It can also be a means for teaching financial responsibility. One way to accomplish this is by making it a family affair.
Discussing charitable giving with family members helps them to understand how meaningful it is to you, the importance of altruism for the betterment of society, and how participating in philanthropy as a family can help bring everybody together with financial responsibilities, especially regarding generational wealth. There are several benefits that come with charitable giving. These include:
Charitable donations can be tax-deductible
Charitable contributions to an IRS-qualified 501(c)(3) public charity can only reduce your tax bill if you itemize your taxes. You may consider itemizing if the combined total of your projected deductions – including charitable gifts – adds up to more than the standard deduction.
- You can generally deduct up to 60% of your adjusted gross income when you donate cash to an IRS-qualified 501(c)(3) public charity. Appreciated assets, provided you have held them for more than a year, are generally deductible at fair market value up to 30% of your adjusted gross income. This includes long-term appreciated stocks and property.
- If you plan to take a charitable deduction, ensure the non-profit organization is an IRS-qualified 501(c)(3) public charity or private foundation. Put the tax receipt from the charity in a safe place. For non-cash donations, you may have to obtain a qualified appraisal as evidence to support the value of the deduction you are claiming.
- Itemize your deductions and file the return.
The opportunity to build social connections
Sharing your time with others is a good way to meet new people, and working with them toward a common goal that benefits others can generate positivity in numerous aspects of your life. Studies in the Blue Zone (specific areas worldwide where people live longer than average with a lower incidence of chronic disease) indicate that people who regularly spend time with others instead of living alone are happier. And, according to academia.edu, happier people make better decisions.
A lesson in financial responsibility for your children
Many families face a complicated issue: teaching their loved ones about financial responsibility. This especially becomes a factor when dealing with generational wealth, the passing down of a significant amount of money from parent or grandparent to children or grandchildren. Historically generational wealth generally doesn’t make it past the third generation. A study by NASDAQ estimated that 70% of wealthy families will lose their wealth by the second generation, and 90% will lose it by the third.
One argument is that the beneficiaries don’t receive the necessary education before coming into so much wealth. Frivolous spending and poor investment decision-making are common ways beneficiaries squander money. Getting family members together behind a cause you believe in and teaching financial responsibility through this charitable giving opportunity may help them learn how to preserve and grow their wealth while helping others.
Creating a generational legacy through charitable giving
Consider consulting a financial professional to discuss how charitable giving may impact your financial goals. A financial professional can also help design a strategy for how to educate your family on financial responsibilities as you work towards creating a long legacy of charitable giving.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
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