When you’ve reached a point where your wealth management strategies have paid off and you are comfortable in life, giving back is something you can do that will bring a great sense of fulfillment to your life and allow you to leave a legacy to the community, people, and causes you care about.

However, there is still a lot of confusion about giving and ways to give. Most people write a check and fail to benefit from the tax reduction opportunities to maximize the good they are going to do for themselves and for their charity of choice.

Charitable giving can give you a sense of satisfaction that can enrich your life. Charitable giving is a win-win experience. Let’s now explore a few best practices in charitable giving.

What is Charitable Giving?

A charitable donation is a gift made by an individual or an organization to a nonprofit organization, charity, or private foundation. Charitable donations can be made in cash, real estate, motor vehicles, appreciated securities, or other assets or services. It does not include giving gifts to your friends or family.

You cannot, for example, donate $1,000 to your dog, but you can donate that money to an animal rescue organization. From a personal financial planning perspective, contributions to a charity can be deducted on your income tax returns if you choose itemized deductions instead of standard deductions. However, based on the recent CARES Act, up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions is available to people who take the standard deduction (i.e. for taxpayers who do not itemize their deductions). It is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby, reduce taxable income.

People often think that to give charitably and reduce significant taxes, they must set up a private foundation. That is not the case. There are far more feasible options available, which I detail in my book, Own Your Future.

Other people think that they don’t have enough money to make charitable donations, but there are ways to give as little as $1,500 per year. Creating a small scholarship fund is one option. Additionally, being able to give clothes, household goods, or other valuables should not be discounted.

These are all deductible and can be listed on Schedule A of your federal tax return. You can save yourself several hundred dollars in taxes from this simple practice of non-cash donations, as long as you keep good records, and you can benefit the recipient in the process.

Unfortunately, people do make mistakes when giving up their money and assets. Let me show you five common mistakes most people make when gifting. Then I will outline the nine best practices for giving that will help you reach your gifting goals.