Thanksgiving is a great time to take stock of our lives and be thankful for all we have. I am thankful for my healthy and successful immediate family and the fact we are all reasonably happy. I am thankful that both of my children have jobs and have embarked on their careers. In my daughter’s case, she just started her job earlier this month, but so far so good.
But I know there are plenty of people who are not as fortunate as my family and I are. So, I want to write about charitable giving. Charitable giving has a long history in this country. In 1756, Pennsylvania General Hospital opened after a fundraising campaign started by Thomas Bond. Benjamin Franklin arranged for the Pennsylvania Assembly to match contributions in order to complete the hospital. Could this have been the first public-private charitable partnership in the US?
According to Giving USA, in 2015 giving by individuals was $264.58 billion, while total giving by individuals, foundations, bequests, and corporations was $373.25 billion. So individuals were the biggest source of charitable contributions. Corporations only gave $18.45 billion. What did the average person give to charity in 2015? According to the IRS, the average charitable deduction for those with an adjusted gross income of $50,000 to $100,000 was $2,990.
Americans give. But do you give? Of course, not everyone is in a position to give. Maybe you have significant expenses that you can’t cover or an unexpected drop in income. Maybe you’ve bought more house or more car than you can really afford and just don’t have the financial flexibility to be charitable. But just as we are coming into the season of gift-giving excess, think about whether the stuff that you are spending your money on is really worth it. Think about the stuff accumulating in your home or that you throw out every week.
So you really want to give to charity, but have never done it. How do you choose what charity to donate to? Well, what kinds of things do you care about? Here are some suggestions of different kinds of charities:
- Foodbanks (There is probably one in your area, but look at feedingamerica.org to find one)
- Church, Temple, Mosque. Are you religious? Your house of worship probably has more than one fund which you can donate to.
- International Relief Organizations. These organizations are active in war zones and areas with natural disasters. Organizations include Save the Children, Oxfam, Doctors without Borders, and UNICEF.
- Colleges and Universities. Your alma mater will gladly take your donation. Much of the money higher educational institutions take in is used for student scholarships.
- Cultural Institutions. Your local museum, botanical garden, community theater, or zoo.
- Environmental Organization. I happen to like local organizations like local land trusts or other local conservation organizations, but there are many local, state-oriented, and national organizations.
- Local Civic Organization. Your local hospital, ambulance corps, volunteer fire department, veterans organization, or even United Way will gladly make use of your donation in your own community.
Is there anything to watch out for when giving? The best way to give to charity is by check or credit card either by mail or on the charity’s website. Cash donations might make you feel good, but you don’t get a tax receipt and its probably for very little money. If a store you’re shopping in is making a donation because you’re buying something, that’s OK if you would buy it anyway, but remember this is the store’s donation, not yours. It is also my rule to never give to anyone who calls me on the phone. There have been several scams in the news about police charities and veterans charities calling people to solicit donations. None of the money donated went to the groups they were supposed to support. The other issue is paid fundraisers. Many of the people who call you are paid fundraisers and they always take a chunk of the donation to pay themselves. In some cases as much as 100% of the donation. Unfortunately its legal, but certainly unethical. So I always tell the person on the phone that I never respond to telephone solicitations and I hang up the phone. If its a worthy cause I will look up the charity on the internet and give by sending a check or using a credit card on the website. Don’t even give a pledge on the phone because then the paid fundraiser gets paid and not the charity.
So what are the tax ramifications of charitable donations? Well, if you itemize deductions you will be able to take a tax deduction for the charitable donation. This means the government shares in your donation. If you are in the 33% tax bracket and you make a donation of $100, the charity gets $100, but you will have only paid $77. Uncle Sam pays the other $33 because of your tax deduction. You can deduct up to 50% of your income and if you happen to donate more, you can carry forward the excess to next year.
There are some sophisticated ways to make donations including bequests in your will, charitable trusts, pooled income funds, private foundations, and donor advised funds. Contact me if you want more information on any of these, but they tend to be for larger donations (although you can give anything in your will). Also, you can give things other than cash. If you have low-basis stock (stock for which you have significant gain in), you can donate shares of the stock to a charity. You get the full tax deduction and don’t have to pay capital gains tax. The charity doesn’t pay any tax either, so its a win-win. Many charities will gladly take your old car too, but unless your donation is to a car museum (where the car is a integral part of the charity’s mission), you will only get a deduction for what the charity sells the car for. You can donate artwork to a charity too, but if you (or your spouse) is the artist, unfortunately your only tax deduction is the cost of the materials. Even if your name is Jeff Koons.
So Happy Thanksgiving. Enjoy your turkey, but then think about making some donations to charity this year!