As a donor, you can help actualize a bold, ambitious dream of what the world could be.
The magical beauty of your charitable giving results not only in tax savings for you but, as importantly, enhances our community and our world.
Nonprofits change humanity for the better in myriad ways, whether through human services, the arts, healthcare, education, animal care or ecology.
As a donor, you are advancing equity and justice, enriching lives through museums and art, helping to nourish your fellow humans, curing diseases, and much more.
So, don’t miss out on the joy that comes from being part of the vibrant process of giving back to others through your charitable gifts.
You can be smart about leveraging your resources and be generous about making a difference for good at the same time. Also, research shows that gifting yields mental health benefits for the donor.
Nonprofits need charitable donations more than ever.
According to Santa Barbara Foundation’s State of Nonprofits in Santa Barbara County: “Nonprofits in Santa Barbara County are experiencing an increased demand for their services due to various factors, including the COVID-19 pandemic, inflation, and housing concerns.”
Therefore, many donors are increasing donations to their favorite charities because of these many challenges.
The report shows nonprofit assets and revenue have increased over recent years, but so has demand for services, fueling higher expenses.
So, individual donations, which comprise nearly 20% of most nonprofit operating budgets, are more important than ever.
Unrestricted gifts help organizations spend funds as they see fit. Many are working to build capacity, pay their employees a living wage, finding ways to adapt to the new reality and innovate to create better ways of service delivery.
As a donor, you can’t give to every solicitation that fills your mailbox. So be proactive. Decide what causes stir your own soul. Make a short list of your categories of interest, then begin to list local organizations that address those areas of need.
Choose the best giving vehicles for you.
Before deciding how much you want to give to each organization, you will want to look at the possible ways of giving to determine which ones are best for you.
Charitable giving can help reduce your income taxes, estate tax, and capital gains tax, so it is crucial to think about how you can best leverage tax rules to expand your philanthropic impact.
Almost everyone can give something, and each method of giving has its own benefits. Donating through donor-advised funds is becoming more popular.
These funds are charitable giving accounts offered by a sponsoring organization, such as the Santa Barbara Foundation or companies like Morgan Stanley that are designed as an accessible, simple, and less expensive alternative to private foundations.
Deposit your funds, let the sponsoring institution manage it, and then donate to the causes of your choice.
The Wall Street Journal published an article about donor-advised funds recently. Here are some interesting highlights from that article:
“Donor-advised funds let donors contribute assets such as cash, stocks or bonds for charitable purposes. These contributions are tax-deductible, up to certain limits, and people can recommend where they want their assets to go.
• “It is important to consider your contributions carefully, because once you contribute to a donor-advised fund, the transaction cannot be unwound.
• “If you itemize, donor-advised funds can help boost your deductions. Likewise, if you are on the cusp of itemizing, the deductions from a donor-advised fund could push you over the edge.
• “The advantage of donor-advised funds is the ability to spread donations to charities while taking advantage of the timing of the deduction.
• “However, older people can receive more favorable tax treatment if they donate directly to a charity rather than through a donor-advised fund. Individuals who are 70½ years old or older can donate up to $100,000 to one or more charities directly from a taxable IRA, instead of taking their required minimum distributions, and there is no tax on the withdrawal.
• “If donors want to support multiple organizations, a donor-advised fund can help ease the administrative burden. They can make a donation at once and then choose the recipients later.”
In addition to donor-advised funds, here are some of the more popular giving vehicles to consider:
• Writing a check offers a quick and easy way to donate. You can mail this to the organization or donate through their website. This can be an immediate income tax deduction and removes the value from your future taxable estate.
• Giving assets such as cars, real estate, clothing or household goods can be deducted based on the full fair market value of the items.
• Including the charity in your will makes the donation exempt from federal estate tax and allows you control of your assets for your lifetime.
• You can make cash donations to IRS-approved charities directly out of your traditional IRA and not have it included in your adjustable gross income. If you’re older than 70½, you can also set up an IRA account with a checkbook to use for your charitable gifting.
• Donating appreciated stocks and mutual funds eliminates tax on long-term capital gains and offers an immediate charitable deduction based on the value of the stock or mutual fund.
• Gifting your retirement assets allows you to make the gift from the most highly taxed assets.
• Making a gift of life insurance offers a current income tax deduction and allows you to make a large gift with little cost to yourself.
• Setting up a family foundation appeals to some high-net-worth individuals because it is the best way to make sure your donation totally matches your values and interests.
• Giving circles like Women’s Fund of Santa Barbara are both fun and practical.
• Arranging for a planned gift such as a charitable remainder trust, a charitable lead trust, or a charitable gift annuity has a variety of benefits and is best handled by a financial professional.
• Remember, volunteering your time doesn’t cost you a dime. Whether you have one hour a week or one day a year to give, you can donate your time to a cause that inspires you.
Please know that you will make a positive difference to whichever nonprofits you give to. Each organization will appreciate your gifts this year more than ever since many are still working hard to survive the many recent challenges.