Everyone benefits except the IRS with this legal charitable donation strategy, according to an advisor.

• Experts suggest that while swiping your credit card on Giving Tuesday is simple, other assets may provide a greater tax deduction.
• Claiming a charitable deduction requires itemizing tax breaks, which has become more challenging with the larger standard deduction since 2018.
• It is more advantageous to transfer profitable investments from a brokerage account to avoid capital gains taxes.

Gifting another asset could provide a bigger tax break when donating to charity, rather than simply swiping your credit card or sending a check.

According to GivingTuesday Data Commons, $3.1 billion was donated by 34 million U.S. adults for Giving Tuesday 2023, representing a 0.6% increase from the previous year.

Charitable giving can be made more profitable by accepting stock as a donation, according to certified financial planner Michael Lofley of HBKS Wealth Advisors in Stuart, Florida. He is also a certified public accountant.

"By donating stock directly to charity, you avoid paying taxes on a sale, and the charity also avoids paying taxes when they sell it. The only loser is the IRS."

When filing taxes, you can choose between the standard deduction or your total itemized deductions, which may include charitable gifts, medical expenses, state and local taxes capped at $10,000 and more.

According to the most recent IRS filing data, only about 10% of taxpayers itemized tax breaks in 2021, despite the higher standard deduction that has been in effect since 2018.

To claim the charitable deduction in 2024, single taxpayers must have total itemized deductions exceeding $14,600, while married couples filing together must have total itemized deductions exceeding $29,200.

Cash gifts are 'not usually the most tax-effective'

According to CFP Mitchell Kraus, owner of Santa Monica, California-based Capital Intelligence Associates, who specializes in charitable giving, while giving cash is a great option, it is not typically the most tax-effective method for donations.

When selling assets held in a brokerage account for more than one year, you'll be subject to long-term capital gains taxes, which are assessed at 0%, 15%, or 20%, based on your taxable income. Additionally, there's a 3.8% investment surcharge for higher earners.

Donating appreciated assets can help you avoid capital gains taxes on growth. If you've owned the investment for more than one year, you can deduct its market value. However, itemizers can only claim a deduction capped at 30% of adjusted gross income for donations to public charities.

Consider 'stacking deductions'

Experts suggest that investors typically group their charitable contributions when they have profitable investments.

CFP Paul Penke, client portfolio manager and operations director for Ironvine Capital Partners in Omaha, Nebraska, advised donors to "stack deductions in alternating years" to exceed the yearly standard deduction.

According to Penke, one way to achieve tax benefits is by opening a donor-advised fund, which provides an upfront deduction and flexibility to make future gifts to eligible nonprofits.