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Tax-Wise Donations: 5 Powerful Benefits of Charitable Giving

Charitable Giving
For Christians, the benefits of charitable giving extend far beyond tax breaks and altruism. Instead, it focuses on ensuring their gifts are donated in a way that will have the highest impact on advancing the Kingdom. |

Tis the season for generosity! Did you know that in 2017, Americans gave over 400 billion dollars to various charitable causes? A number that continues to increase year after year. In fact, a survey by Bankrate’s Money Pulse shows that the American people are among the most generous worldwide, giving billions of dollars away each year to support thousands of causes.

The benefits of charitable giving are unparalleled. Now, giving is easier than ever due to an increasing number of investment companies managing charitable gift funds that allow individuals to open Giving Funds, also known as Donor Advised Funds, and control how/where their money is given. 

A Giving Fund can be looked at like a charitable bank account that is used for supporting charities that are important to you. As the fastest-growing charitable vehicle in the United States, it is no surprise that individuals and businesses alike are jumping on board with this unique way of donating. Not only are Giving Funds one of the easiest and most tax-advantageous ways to give to charity, but they also allow you to generate a greater economic impact for both the Kingdom and for yourself. 

As the old saying goes, “It's better to give than to receive” and the Christian community truly embodies this phrase. For Christians, the benefits of charitable giving extend far beyond tax breaks and altruism. Instead, it focuses on ensuring their gifts are donated in a way that will have the highest impact on advancing the Kingdom.

Just in time for the holiday season, here are five “need to know” benefits of charitable giving. 

1. Bypass Capital Gains

When it comes to charitable giving, cash isn’t always the most effective asset to donate. 

Donating nontraditional assets allows the giver to bypass capital gains on the donated portion, while also receiving a charitable deduction. 

Gifts of non-cash assets – such as real estate, stocks, or business interests – may provide dramatically enhanced tax benefits to the donor. By giving these assets to charity, the giver secures a charitable income tax deduction and also avoids capital gains tax that would result from the sale of those assets. Together that means you save more in taxes and your preferred charities receive more money.

Unsure of how to donate your non-traditional assets? WaterStone, a Christian community foundation that serves donors nationally, helps givers identify innovative, tax-smart giving solutions and transform complex assets into living water for the Kingdom. 

2. Generate Income 

There are several different kinds of charitable trusts that provide an immediate tax deduction, income for life, and the remainder goes to charity. These include a charitable remainder unitrust and a pooled income fund, both of which can be administered by WaterStone.

These charitable trusts can be funded with cash or appreciated assets such as stock or real estate, avoiding any capital gains.

Whether you are looking for an annuity with a specific dollar amount, a percentage payout that can increase over time, or simply to receive income earned in the trust, a charitable trust is a great solution that provides both lifetime income and a charitable tax deduction.

3. Save Taxes with a Charitable Deduction 

Charitable deductions allow the giver to offset ordinary income taxes. There are limits and carryforwards to consider, but also significant tax savings. Donating non-traditional assets such as real estate or business interests provides the donor with an immediate fair market value tax deduction.

A Giving Fund simplifies the giving process and increases your charitable impact while reducing your tax liability.

Here’s how it works: After establishing a Giving Fund through WaterStone, you can make gifts of cash or non-traditional assets. In return, you receive a charitable deduction, and the fund disburses money to charities that are important to you. 

With a Giving Fund, your entire contribution is deductible in the year you give, with a five year carryforward opportunity. Additionally, you can spread out your distributions to your favorite charities in future years and unspent funds continue to grow tax-free.

Unlike with a Private Foundation, there’s also an option for anonymous giving from your Giving Fund, which reflects Matthew 6:3-4: “But when you give to the needy, do not let your left hand know what your right hand is doing,  so that your giving may be in secret. Then your Father, who sees what is done in secret, will reward you.”

4. Maximize Kingdom Impact 

Perhaps the most obvious benefit of charitable giving is that it can maximize your Kingdom impact and meet the needs of those less fortunate. In certain countries, even just a few U.S. dollars could result in a week’s worth of meals for an impoverished child.

WaterStone helps you live generously by providing the maximum amount to charity in a tax-wise way.  A Giving Fund, for example, allows you to quickly recommend grants at the moment a natural disaster strikes or instantly send assistance to those in need of relief. 

It’s important to vet charities to ensure they align with your beliefs and values. WaterStone helps clients complete this due diligence and choose charities whose mission statement aligns with their Statement of Faith. As a faith-based company, WaterStone’s mission is to Honor God through the transformational power of giving, Serve givers at the intersection of faith and finance, and Build the Kingdom by transforming assets into living water.

Through intentional giving, you can generate a greater economic impact, both for the Kingdom and for yourself. “Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver.” – 2 Corinthians 9:7.

5. Create a Legacy 

What kind of financial legacy will you leave behind? Charitable giving helps you model financial wellness and biblical stewardship and responsibility for the next generation. Establishing a Giving Fund is a great way to introduce your children — and eventually grandchildren — to the benefits and responsibilities of charitable giving.

The Bible repeatedly addresses biblical stewardship. As Christians, we believe that “Every good and perfect gift is from above” (James 1:17). Thus, a biblical view of generosity compels us to give back out of gratitude to the One who first blessed us. 

Scripture is clear that God cares about how we use our resources and urges us to view our money and resources as gifts. For instance, Matthew 6:24 reads: “No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.”

As Christians, this should be at the heart of why we give. The tax breaks are nice, but creating a legacy of giving with your family and community is powerful. It creates a culture of gratitude, understanding that God entrusted you with these assets to be used wisely for his Kingdom and for the good of others. Those who hold their money loosely indicate their true hope is placed elsewhere. What better legacy is there to give than a hope in Jesus Christ as your security, rather than money?

When we give generously, we do so as stewards of resources that really belong to God. Charitable giving can be an effective way to impart important biblical values to the next generation.

To learn more about the benefits of charitable giving, visit waterstone.org.

WaterStone serves as a conduit between givers and Kingdom causes, crafting personalized giving plans that honor God by blessing ministries and the people they serve. By partnering with WaterStone, advisors can incorporate giving strategies into their wealth management practices and help their clients make a greater Kingdom impact. With WaterStone's Charity Advised Funds, churches and nonprofits can efficiently manage pools of money set aside for a specific purpose.