December is traditionally a time to reflect on the chapter we’re about to close and look with hope and anticipation to the year ahead. It’s also a time marked by gratitude, goodwill, and generosity. So, it is perhaps no surprise that about one-third of charitable giving happens during this final month of the year.
While charitable giving is a perennial need, 2020 has brought that need into sharper focus. From Covid-19 relief to long-term issues that span the spectrum, the demand for charitable services is accelerating. Yet, some organisations have seen their regular funding sources decline as donors face their own economic challenges. In some cases, the donors of yesterday have become the recipients of today.
Faced with these difficulties, charities have shown remarkable resilience. A recent survey of over 400 global and local charitable organisations conducted by CAF America (Charities Aid Foundation of America) brought to light the creative approaches charities are taking to raise funds and provide much-needed services. Ninety-one per cent of respondents said they continue to be impacted by the pandemic – yet they’ve managed to remain operational at some level thanks to their ingenuity and agility. While almost half believe they can continue operating under these conditions for as long as needed, others are less sure about their future.
Amidst this uncertainty, there is a bright spot: the will to give is alive and well. Additional survey findings indicated that two-thirds of the corporate donor respondents expect to maintain or increase their funding over the next year – a sign of their generosity and capacity. Though some donors have experienced revenue and income declines in this difficult year, those that are thriving are clearly eager to help.
Effective Ways to Lend Support
This charitable giving season is an opportune time to support the organisations and causes you’re most passionate about. It’s also an ideal time to leverage strategies that can make your funds go further.
Take advantage of the enhanced tax benefits provided by the CARES Act.
Earlier this year, the CARES (Coronavirus Aid Relief and Economic Security) Act introduced a new universal charitable deduction of up to $300 per non-itemizing individual taxpayer. It also provides an additional short-term boost to the traditional tax advantages of charitable giving – corporations can now deduct up to 25 per cent of taxable income (vs. the usual 10 per cent) and individual taxpayers who itemize can deduct up to 100 per cent of adjusted gross income (vs. the usual 60 per cent). Contributions to Donor Advised Funds (DAFs) do not qualify for these enhanced benefits. Only those 501(c)(3) organisations and DAF sponsoring charities that offer the option of restricted and not donor-advised giving can accept funds that qualify under the CARES Act. Take a look at our blog post for more details on the CARES Act benefits, expiring December 31.
Plan ahead with bunching your donations.
Of course, with the standard deduction now at $12,000 for individuals and $24,000 for couples, many donors might not itemize their deductions. However, you can give in excess of the standard deduction by contributing multiple years’ worth of donations to a US public charity or a DAF in a single year. Using a DAF for bunching means the donor can then recommend grants from their fund to their favorite domestic or foreign charities – if the intermediary organisation hosting the DAF is able to make cross-border grants – whenever they want and whenever is best for the charity.
Expand your giving power by making a direct QCD from your IRA to a charity.
Even though the CARES Act waived the required minimum distributions (RMDs) for 2020 from retirement accounts, making a Qualified Charitable Distribution (QCD) from an IRA remains another effective year-end strategy. Since a QCD doesn’t incur income tax, the full amount of your charitable contribution goes directly to work for a good cause. QCDs cannot be made to DAFs. Only those 501(c)(3) organisations and DAF sponsoring charities that offer the option of restricted and not donor-advised giving can accept QCDs.
Use your assets to make a difference.
And finally, don’t overlook the option to donate appreciated property directly to your favorite charitable organisation, rather than selling the property, donating the proceeds, and incurring taxes in the process. While working with an accountant or financial advisor is always advisable for planning your giving, we gathered some useful tips on tax-advantaged giving in this blog post.
The unique challenges of 2020 have created a shared experience, bringing us together as a global community. We’ve become acutely aware that universal needs know no borders, and that’s altered our view of what it means to ‘give local.’ With the Internet putting the world at our fingertips, everyone can learn where the areas of greatest need are, for communities and topics that matter to you most. Donors can connect with the organisations that are hard at work to address these needs, both near and far. Wherever you are in your own experience this year, December can be a season of hope and generosity.
Ted Hart is President & CEO of CAF America.