As the season of giving is upon us, let us remember that the best gifts are those given from the heart. Gifts always mean so much more when they are given intentionally.
My husband and I have three small children. It only took a few years of parenting for us to realize that new toys quickly lose their shine and become stress-inducing household clutter. After a few chaotic Christmases, we needed a solution. Together, we put an intense amount of thought into how we want to gift and have adopted a strategy that brings our children year-round joy without the waste and clutter.
Santa has children all over the world to deliver gifts to, and we want our children to know that Santa treats all the kids on the nice list equally. So each of our children receive four gifts from Santa, (something to wear, something to read, something they want, and something they need). As Mom and Dad, we gift our children experiences rather than toys. For us, that includes a family pass to The Texas Zoo, The Children’s Discovery Museum, The Texas State Aquarium, and other local attractions. Likewise, we encourage our friends and family to do the same when giving gifts to our children. Fishing on Coleto Lake with Grandpa and performances at Theatre Victoria with Grandma are memories that last a lifetime, unlike toys. Thanks to our thoughtful planning, we now enjoy less clutter and more joy that extends far beyond the Christmas season.
Charitable giving is owed the same, deep level of thought and should be considered as a part of your year-end tax planning. If you itemize deductions on your federal income tax return, you can generally deduct your gifts to qualified charities. With the right preparation, the tax benefits associated with charitable giving may even potentially enhance your ability to give. For example, consider a charitable gift of $1,000. At a 32% tax rate, you may actually be able to give $1,471 to charity [$1,000 ÷ (1 – 32%) = $1,471; $1,471 x 32% = $471 taxes saved].
If you can control the timing of income and expenses, then try to time your recognition of income to be taxed at the lowest rate possible, and time your deductible expenses to be claimed in years when you are in a higher tax bracket. If you expect to be in a higher tax bracket next year, making a charitable contribution the following January instead of this December will allow you to take the deduction next year, resulting in a greater tax benefit.
Make sure you keep records of all of your charitable gifts in the form of bank statements and written confirmations and avoid being scammed by only dealing with recognized charities. Visit irs.gov and use the Tax Exempt Organization Search tool to check the status of any charities you are considering gifting to.
Gifts of all kinds, whether to children or to charity, truly have the potential to go much further when they are given with intention. Together, a CERTIFIED FINANCIAL PLANNER™ professional and a CPA can help you develop an intentional plan for your charitable efforts that works for you and your unique financial goals.
Published in the Victoria Advocate
Hannah is a CERTIFIED FINANCIAL PLANNER™ professional and the Chief Compliance Officer of KMH Wealth Management, LLC. She has been with the firm for nearly 5 years.