Charitable Giving

The Benefits of Charitable Giving

 

In 2015, Americans gave $373.25 billion to charity with more than $268 billion (70%) coming directly from individuals.1 As a nation, we are nearly twice as generous in our private giving as Great Britain and Canada, and ten times more charitable than the residents of many other developed nations including Italy, Germany and Japan.2 By all accounts, the philanthropic spirit appears to be an essential part of our national ethos.

It’s often said that the true test of any civilization is in how it cares for its most helpless members. If that is true, then it seems as though what Lincoln referred to as “the better angels of our nature,” remain alive and well in our nation. But as many have pointed out, charity can be as much, if not more, empowering for the giver as it is for the recipient. As individuals, charitable giving affords us an incredible opportunity to throw off the blinders of our insulated day-to-day routine and look beyond ourselves, engaging with others in meaningful and potentially life-changing ways. It can not only give greater purpose to our lives, but improve our overall sense of self-worth.

Financial giving often serves as an entry point for many people to become more deeply involved in the causes and charities they are most passionate about – providing a means to learn more about the ongoing activities of the organization and identify opportunities to become actively engaged as a volunteer. It also serves as a unique opportunity to impart cherished family values to your children and grandchildren. Family philanthropy, whether in the form of sitting down together to discuss the social issues you care about and identify specific charities to support, or planning a family volunteer day at your local food pantry, can light the philanthropic spark that propels the next generation to be more generous, empathetic and active in the community.

Tax benefits

And although altruism should always be the primary driver of any charitable intentions, the Internal Revenue Service (IRS) strives to provide an added incentive for your charitable efforts in the form of tax benefits. Any gifts to a qualified charitable organization may entitle you to a charitable contribution deduction against your income tax if you itemize deductions. In general, taxpayers can deduct up to 50% of adjusted gross income (AGI) for charitable gifts for a given tax year; and gifts that exceed the 50% threshold can be carried forward for a period of up to five years.

Gifts to qualified charities are only deductible in the year which the contribution was paid (or donated if a non-cash gift). And all non-cash donations must be valued at the property’s fair market value (note: this can be very advantageous with highly appreciated stock since you are not taxed on the appreciation yet get a deduction for the full market value). Make sure, however, that you obtain written documentation to substantiate any and all tax deductions. Regardless of the amount, to deduct any cash contributions you must have either a receipt from the qualified charity or a bank record (e.g., a bank, credit union or credit bard statement, or a cancelled check) that shows the name of the qualified organization along with the date and amount of the gift.

How to get started

There is no such thing as a right way or wrong way to give; each person’s approach will depend on the commitment they can make and the particular needs of the organizations they wish to engage with. First and foremost, conduct due diligence on any potential charities before you give. Review the organization’s website and literature or use one of the reputable third-party charity evaluation websites such as www.GuideStar.org or www.CharityNavigator.org to help determine whether they have a clear mission, achievable goals and can demonstrate meaningful progress.

While writing a check remains the most common method of charitable giving, more and more individuals and families are turning to structured giving vehicles to help them better manage their giving. From simple donor advised funds (DAFs)3 that are easy to set-up, require a minimal initial deposit (many can be opened with as little as $5,000) and offer a number of advantages over checkwriting, to charitable trusts that are used by many families to help fund their philanthropic desires while preserving their family’s long-term financial security, there are a myriad of available options. Most importantly, remember that it does not require tremendous wealth to generate meaningful results. All you need is an abiding social conscience and a passionate commitment to make a difference.

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1 Giving USA, 2015 
2 “The Almanac of American Philanthropy,” Philanthropy Roundtable, January 2016
3 Donations are irrevocable. The Board of Directors of the Fund has ultimate control over all assets. Donors have no right to income or principal and account values will fluctuate. The amount ultimately available for Donor recommended grants may be more or less than Donor contributions. Potential donors should consult their tax advisors.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

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