The season of giving is over. Or is it? People are often moved to philanthropy at the end of the year, but charity may be better baked into your overall financial plan as well as your annual budget.
“I think the combination of the holiday season, as well as the year-end tax deadlines for those people who itemize and want the tax benefit of giving to charity, tends to make the end of the year a very busy time for giving every year,” says Kim Laughton, president of Schwab Charitable, an independent public charity that provides donor-advised funds. “And this past year, in particular, with the tax laws changing, lots of people were giving even more … to try and maximize the tax benefit.”
[See: 10 Financial New Year’s Resolutions.]
The new tax bill, which will affect your filing for 2018, does preserve the deduction for charitable giving, but fewer people are likely to take advantage of it. That’s because it may make financial sense to skip itemizing and instead claim the standard deduction, which is nearly doubling to $12,000 for individuals and $24,000 for married couples filing jointly. Without that tax incentive, the question is whether people will still feel inclined to give as much.
“Within the sector, there is an enormous amount of concern, but the bottom line is that we don’t know,” says Larry Lieberman, chief operating officer of charity evaluator Charity Navigator. “Will the tax law make Americans any more or less generous? I doubt it.”
Either way, you can figure out how to give in a tax-efficient way and maximize the value of your contributions by being proactive and planning for your 2018 giving now. After all, being charitable doesn’t have to end when the new year begins.
“Most people are thoughtful about the various expenses they have in their life … but oftentimes, they tend to be a little less strategic about how they think about [philanthropy],” Laughton says. “If they can bring that thought forward and think about it when they’re thinking about their other expenses, they can do a much better job of managing it, be more tax-effective and have their money go farther.”
[See: 10 Foolproof Ways to Reach Your Money Goals.]
How can you be more intentional with your giving?
First, consider your own values and decide which causes you’d like to support, says financial planner Marguerita Cheng, chief executive officer of wealth management firm Blue Ocean Global Wealth in Gaithersburg, Maryland. For example, if a loved one is afflicted with a disease or condition, you may feel inclined to help fund research for combating it. That’s how Cheng decided to give to the Asthma and Allergy Foundation of America. “Our son was diagnosed with asthma as a toddler,” she says. “This cause is important to us.”
Next, you need to make room in your budget for what matters to you most. If you want to make giving a priority, you may need to trim expenses elsewhere.
If you don’t have the funds to match the size of your largesse, consider giving something besides cash. Volunteering your time, donating food and clothing, giving blood, hair, bone marrow — any act of charity can have a great impact. In fact, this more tangible approach to giving can have the added benefit of helping teach your kids about charity. Cheng notes that her family donates food for Thanksgiving dinner at local food banks every year. “It was something that my kids could really connect with when they were younger,” she says.
[See: 12 Ways to Be a More Mindful Spender.]
Another great option: donating appreciated stocks or mutual funds. Especially given the bull market of recent years, you’re likely to have seen some gains in your portfolio, making it a great time to share the wealth. You can give those winning investments directly to charity (most large organizations are ready to accept such gifts) and avoid paying capital gains taxes on the returns. The charity can then sell the stocks — also without having to pay those taxes because of its tax-exempt status — and enjoy all the proceeds. “Essentially that allows you to give up to 20 percent more than you would otherwise because you’re not having to sell the stock, pay your capital gains tax and then give the proceeds,” Laughton says.
Also consider putting your appreciated investments in a special account called a donor-advised fund, or a DAF. That allows you to immediately reap the same tax benefits you’d get by giving directly to charity, but gives you time to decide which organizations you’d like to receive the funds. Plus, through a DAF, you may be able to give to smaller organizations that may not be equipped to receive stock gifts directly.
Once you know how much you can afford to give and how you want to give it, you have to decide on which particular charity (or charities) you want to support. You have tons of organizations to choose from, even within a single cause — which might be overwhelming. For example, if you’re hoping to help fund finding a cure for diabetes, Charity Navigator’s site turns out 16 rated charities and 365 unrated groups related to the disease.
How do you choose which one to support? “The first idea in philanthropy is to give to the organizations that are having the most impact on the issue you want to address,” Lieberman says. That means looking for charities that offer transparency into how they’re using donated funds and ensuring your well-intended donations aren’t just used to cover overhead costs. Organizations such as CharityWatch, BBB Wise Giving Alliance and Lieberman’s Charity Navigator can help you quickly research these points.
And you can help charities keep their costs down by giving regularly and automatically. Even better, check with your employer to see about making donations via payroll deduction. Not only does this make it easier for you to give, it also makes it easier for charities to receive. “Reducing the frictional cost of giving is important,” Lieberman says. “Setting up recurring giving reduces the cost of the charities having to get your money and helps to maximize the money that goes to the actual programs’ missions.”
Finally, spread the word. Even if you can’t afford to give much cash to some cause, you may be able to help raise additional funds for it by raising awareness. Perhaps your employer will match your contributions, or you can simply encourage others to give.
“Motivating a friend to give, a family member to give — these are incredible, powerful things to do,” Lieberman says.
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How to Give More to Charity This Year originally appeared on usnews.com
