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 a myriad of ways, whether through human services, the arts 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.
>>You can choose from a plethora of local charities for your support.
Donors are increasing their giving to their favorite charities and including additional nonprofits because they are aware of the suffering that has occurred from an increased demand for services because of the pandemic. For example, the Foodbank of Santa Barbara County is serving more people than ever before. Other organizations like CALM, Friendship Center, Domestic Violence Solutions, CADA, Rescue Mission and Hospice of Santa Barbara are being especially challenged by these difficult times. Some organizations like the Santa Barbara Foundation and United Way of Santa Barbara County have been giving direct aid to families impacted by job loss and other challenges.
The pandemic has also significantly hurt the arts, music, and museums. If arts and music interest you, you might consider donating to Camerata Pacifica, Opera Santa Barbara, Santa Barbara Dance Institute, or Music Academy of the West. If museums are your preference, we suggest Santa Barbara Museum of Natural History, Santa Barbara Maritime Museum, or Trust for Historic Preservation. Of course, our healthcare facilities were severely impacted by the pandemic, including Cottage Hospital, Sansum Clinic, Neighborhood Clinics, and the Cancer Center. Others worthy of your donations include Santa Barbara Response Network and TV Santa Barbara.
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 and then begin to list organizations that address those areas of need.
>>Choose the best giving vehicles for you.
Before you decide how much you want to give to each organization, you will want to look at the possible vehicles or 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.
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. Put your money in, 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 door-advised fund. Individuals who are 70 ½ 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.
- Donating appreciated stocks and mutual fundseliminates tax on long-term capital gains and offers an immediate charitable deduction based on the value of the stock or mutual fund.
- Gifting your retirementassets 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 Barbarais 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 that 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.
Are you worried about giving in a turbulent time for markets and the decline in financial assets? Jackie Carrera, President & CEO of the Santa Barbara Foundation, offers this insightful perspective. “While many assets have declined in value during this turbulent time, donors may still have sizable unrealized long-term gains and may find stock donations attractive, since they can still deduct the fair market value of the donated stock from their income taxes, up to the allowable amount.”
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 challenges from the pandemic.