Your Guide to Charitable Giving this Holiday Season
Sara Rolls, Associate Advisor
What is #GivingTuesday?
According to www.givingtuesday.org #GivingTuesday is celebrated on the Tuesday following Thanksgiving (in the U.S.) and the widely recognized shopping events Black Friday and Cyber Monday. #GivingTuesday kicks off the charitable season, when many focus on their holiday and end-of-year giving. Since its inaugural year in 2012, #GivingTuesday has become a movement that celebrates and supports giving and philanthropy with events throughout the year and a growing catalog of resources.
There are many ways to contribute to the causes near and dear to you, and during this season of giving. Also, there are often incentives to do so…aside from satisfying your philanthropic ambitions!
Employer Matching Programs:
Some employers offer a match for charitable contributions. Check with your employer to see if they offer a program like this. There may be limitations in terms of dollar amounts, designated charities they’ll match donations to, or gift type (cash vs. property), but if your employer offers a matching program, it’s a great way to maximize the impact of your contribution.
Qualified Charitable Distribution:
If you have an IRA, a Qualified Charitable Distribution (QCD) could be an option for you. There are a variety of benefits to utilizing a QCD to support a qualified public charity. In addition to the benefits of giving to charity, a QCD excludes the amount donated from taxable income, which is unlike regular withdrawals from an IRA. Keeping your taxable income lower may reduce the impact to certain tax credits and deductions. There are other requirements that need to be met in order to utilize a QCD, so you’ll want to contact your Advisor to discuss if that’s an option that makes sense for you.
Tax Benefits in Regards to Charitable Contributions:
Regardless of whether or not you are eligible to utilize a QCD, you’re probably aware that there are some tax benefits you can take advantage of when making a charitable contribution. This is important to keep in mind, because not only does your donation support your charity of choice, but it can also help you with your year-end tax burden as well. In addition to keeping thorough documentation of your charitable activities, there are other things you need to remember in order to ensure your donation will qualify as a deduction.
5 requirements of a charitable deduction
- Your donation needs to be made to or for the use of a qualified recipient:
- Examples: Community chest, corporation, trust, fund or foundation operated exclusively for charitable, religious, educational, scientific, or literacy purposes or prevention of cruelty to children or animals. This most commonly includes churches, synagogues, war veterans’ organizations, nonprofit volunteer fire companies, domestic fraternal societies, and nonprofit cemetery companies.
- Your donation should be made with no expectation of a return benefit from the charity:
- If anything (good or service) is received in return for your donation it should be stated on your acknowledgment letter. The amount of this item or service will decrease your deductible contribution. Examples of return benefits are tickets to an event, or tangible goods such as blankets, gift baskets, etc.
- Your donation should be paid to the recipient within the taxable year when the deduction is made:
- For example, a check must be mailed by December 31 in the year the deduction is taken in order to be deductible. It would not be considered deductible for the current tax year if the check is dated December 31 but mailed January 1.
- You should also make sure your donation doesn’t exceed certain percentage limitations:
- You may deduct up to 50% of adjusted gross income for contributions to charitable organizations. This includes churches, public charities and most charitable organizations that come right to mind.
- You may deduct up to 30% of adjusted gross income for contributions to private foundations, veterans organizations, fraternal societies and cemetery organizations.
- You receive the best advantage in high income years:
- However, itemized deductions do have a phase out; reduction to itemized deductions will begin at $313,800 in 2017 for married filing jointly.
- If your contribution is over $250 you’ll need a written acknowledgment letter from the charity:
- These letters should be received contemporaneously with the donation and include whether goods or services were received in return for the donation, the charity’s name, amount given, description of property (if given), date, and donor’s name.
- If you are gifting to your own private foundation you should still receive an acknowledgment letter from one of the foundation’s officers (this may be yourself).
There are other ways to support the charity of your choice, aside from a monetary donation
Contribution of Services
Although these are not typically deductible, donating services can truly make a difference to the charitable organization and its mission. Most charitable organizations are powered by their volunteer force so it is important to keep that giving spirit alive and well.
Gifting Appreciated Stock
Unlike services, gifting appreciated stock does have potential tax benefits. Gifting highly appreciated stock will allow the taxpayer to avoid capital gain taxes and receive a charitable deduction. It is important to gift the stock directly to the charity rather than first selling the stock then gifting the proceeds. If the latter is utilized then capital gains taxes will apply leaving you without the full tax benefit the gift could have provided.
Property can be very useful to a charitable organization. It is a better tax benefit to gift property that the organization will use to serve its purpose, plus it saves the organization valuable time by allowing them to put the item right to use instead of selling it. If the tangible property gifted is unrelated to the charity’s purpose then your deduction may be limited. It is important to also keep in mind that tangible property over $5,000 needs to have a qualified appraisal. You’ll want to contact your Advisor to discuss if gifting tangible property is the right course of action for both you and your charitable organization.
Not sure who to donate to?
It’s important to have confidence in your charity of choice. Unfortunately in times of need, and even around the Holidays there are almost always inevitable scammers who are looking to profit from the generosity of others. Websites like: www.charitynavigator.org do the legwork to check the legitimacy of organizations seeking support, if you’re unsure, that’s a good place to start vetting the charity of your choice.
Many communities have a Community Foundation that supports Philanthropic efforts if you’re looking for a way to make a meaningful contribution, and unsure of where to start. The Finger Lakes Region of NY where the JGUA Headquarters are located, is home to the Community Foundation of Elmira-Corning and the Finger Lakes, Inc. and they are amazing resource for anyone looking to make a difference.
In honor of this Season of Giving and for some inspiration for your own charitable efforts, take a look at their recent video: 45 Grants in 45 Hours – A Journey in Philanthropy which was created as part of their 45th Anniversary celebration. It’s a great look at the typical grant cycle for foundation, and highlights some of the amazing groups in the region we call home, that are great candidates for your own charitable giving efforts.
As always, if you have questions about who to give to or the best way to go about achieving your charitable goals, get in touch with us. We’re happy to help!