Last week, I discussed how there are life stages or cycles to charitable giving that tie to the financial life cycles.

The article also discussed how charitably inclined folks in the early accumulation stage of their financial lives can begin putting their philanthropy into practice.

People in their 40s into their early 60s are generally in the rapid accumulation of the financial life cycle. Careers are generally at the peak of professional earning capacity.

This is a time when tax efficiency can be a way to facilitate building wealth that helps reaching financial independence. There are charitable giving strategies that blend well with other financial goals.

During top earning years, people who give financial donations to charities may have the double benefit of supporting the causes they care about while lowering income taxes.

Being aware of what allows them to itemize deductions can inform the strategy of donations. With mortgage interest, real estate taxes, state income taxes and charitable donations, many with good income will get a benefit from cash donations.

Personal and household goods can also be a source of donation. For instance, clothes that are outgrown, and appliances and furniture that have been replaced, would be greatly appreciated by ARC, Goodwill and other thrift shops. These items need to be in usable condition. The amount the charity can sell the items for — not what you paid for the item — is what you can take as a deduction on your tax return.

Your investment portfolio might have some holdings with capital gains. This presents another opportunity to have tax-efficient charitable donations.

An excellent use for these holdings that you’ve owned for over a year is to donate these appreciated securities to a charity. Nonprofit organizations don’t pay tax. They can sell the securities without a tax impact. There are slightly lower limits of how much you can deduct, but for most folks, that’s usually not a problem.

Another use for securities with embedded capital gains is establishing a donor-advised fund (DAF).

A DAF is established by specific charities, like the Pikes Peak Community Foundation, so that the taxpayers who put money in the DAF can decide in the future what charity the money goes to.

While you’re saving for the day when you can meet your expenses without your earned income, you can use donations to a DAF to fund those future charitable donations and get the tax break now.

Donating the appreciated securities to the DAF avoids paying capital gains, and if you leave the account in growth securities in the DAF, you might have what you have available for charities in the future grow while your retirement savings are also growing.

Donating your time to charities is always appreciated. Your career skills might help a nonprofit.

Be prepared to do what the charity needs in volunteer work, which might not match what you were hoping to do.

Linda Leitz is a certified financial planner. She can be reached at linda@peaceofmindfin.com.

Linda Leitz is a certified financial planner. She can be reached at linda@peaceofmindfin.com.

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