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Time to gear up for your year-end gifting strategies

Help others while minimizing your tax liability

With the year’s end approaching, it’s time to consider planning strategies to help minimize your 2023 tax liability. For those who are charitably inclined, the tax code offers ways to make a difference by helping others while improving their financial situation. 

Cash donations

Cash donations are the easiest way to help others and qualify for a tax deduction. Cash donations of up to 60% of your adjusted gross income (AGI) made by December 31 to qualified charitable organizations qualify for a deduction.

Donate appreciated assets

Donations of stocks and other assets can be more valuable than cash for charitable organizations. When you donate assets that have appreciated in value, you can avoid capital gains taxes while receiving a tax deduction for the fair market value of the assets.

Here are a couple of key rules to follow when donating appreciated assets:

  • If you haven’t owned the stock for over a year, you can only deduct your basis, not the current fair market value.
  • The fair market value of your contribution is based on the average of the high and low prices for the stock on the day it’s transferred.
  • The IRS limits the deductibility of gifts of appreciated property to 30 percent of your AGI. Amounts that exceed that can be carried forward to future years. 

Set up a donor-advised fund

If you want to make a year-end donation but are still determining which charitable organization you wish to benefit or you want to benefit multiple charities, you can establish a donor-advised fund (DAF). A DAF is a smart, flexible, and cost-effective way to manage your philanthropy. 

You can set up a DAF for as little as $5,000 through a custodian who follows your instructions on how the funds will be gifted. Though the funds don’t have to be disbursed to any charities right away, you will still receive a current tax deduction for funding the DAF by the end of the year. 

Qualified charitable distribution

If you are at least 70 ½ years old, you can make tax-free donations directly from your IRA or 401(k). You can instruct your custodian to issue a check up to $100,000 payable to a qualified charitable organization of your choice. You will pay no taxes on the distribution, and it will satisfy your required minimum distribution (RMD) for the year. It can also help you avoid the income-related monthly adjusted amount (IRMAA) assessment on your Medicare premiums. 

Gifts to family members

You can take advantage of the higher gift tax exclusion, which was recently raised to $17,000 per person annually. While there is no tax deduction for the gifts, they are tax-free to family members. Better yet, consider gifting appreciated assets to family members in lower tax brackets, who can sell them at a lower capital gains tax rate. 

Consult a professional

It’s essential to consult with a tax professional or financial advisor to determine the best strategies for your specific financial situation and goals. Tax laws and regulations can change, so staying up to date is crucial to maximizing the benefits of year-end gifting strategies.

About This Author


Alpine Bank Staff

Alpine Bank is an independent, employee-owned organization with headquarters in Glenwood Springs and banking offices across Colorado’s Western Slope, mountains and Front Range.

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