Give your Way-Exploring the many paths to Charitable Giving
on May 10, 2023
A few weeks ago, I had the pleasure of attending a gala fundraiser for one of my favorite nonprofit organizations, Junior Achievement. Junior Achievement’s mission is to inspire and prepare young people to succeed. They do this through programs that teach entrepreneurship, financial literacy, and career readiness skills. You may not be aware, but I worked for this same nonprofit for about 5 years before joining MainStreet. So not only do I believe in the mission, but I truly understand how donations can make a large impact. There are many ways someone can donate to a charitable organization:
- Cash donations: This is the most common way to donate to a charity. Donations can be made directly to the charity or through a third-party platform. Many charities have websites where you can donate online using your credit card, debit card, PayPal, or other online payment platforms, but at the end of the day, it is still considered cash. Cash donations can be one-time or recurring.
- Donating items: Many charities accept donations of clothing, furniture, household items, and other goods. You can drop off donations at a charity’s donation center or arrange for them to be picked up. Here is a great way to value those items if you are eligible to take a tax deduction. Property donations will need acknowledgment of receipt from the charity and items totaling over $500 will need a special form (IRS Form 8283) when filing your taxes. Items totaling over $5,000 will need an appraisal.
- Donating time: Charities often need volunteers to help with events, fundraising, and other activities. You can donate your time and skills to help a charity achieve its mission. This can be especially valuable if you are not able to give monetarily. Find an organization that speaks to you and offer to help.
- Donor Advised Fund (DAF): DAFs are charitable giving accounts that allow individuals, families, or organizations to make contributions to a fund, and receive an immediate tax deduction for the contribution while distributing grants out to charities over time. DAFs provide a centralized vehicle for giving that allows a donor to support multiple charities from a single account. The donor can remain anonymous if necessary and there can be administrative costs associated with DAFs. Here is an additional Mainstreet article that dives a little deeper into this topic.
- Qualified Charitable Distribution (QCD): A QCD is a way for an individual that is 70 ½ or older to donate money to a qualified charity while reducing their taxable income. Required Minimum Distributions (RMD) can be satisfied by donating that amount to charity up to a maximum of $100,000 per year. This will not only reduce taxable income but can allow for charitable giving without itemizing and be beneficial to those who take the standard deduction. There are very specific rules that need to be met, such as the donation (RMD) must go directly to the charity and not to the account holder first and then to the charity to make the QCD donation properly.
- Donating securities or other assets: Some charities may accept donations of stocks, bonds, real estate, or other assets. This can be an effective way for an individual to remove appreciated assets without paying capital gains. These types of donations can offer tax benefits to the donor, however, there are specific rules like holding periods to keep in mind.
- Legacy Giving: This is where you make a charitable donation as part of your estate planning, either by including the charity in your will or naming the charity as a beneficiary of a trust or life insurance policy.
- Workplace giving: Many employers offer workplace giving programs that allow employees to donate to a charity directly from their paycheck. Some employers even match employee donations, make sure to check with your employer to make every dollar count.
- Crowdfunding: This is where you create a fundraising campaign for a specific charity and ask your friends, family, and social media followers to donate.
Many of these options for giving can be simple and some are more complicated. It can be a great idea to consult your tax professional and your financial advisor to determine what charitable giving strategies might make the most sense for your unique situation.
