Many consider donating to causes and organizations a valuable and fulfilling use of their money. Nearly a quarter of Americans made charitable donations in 2015, according to the Chronicle of Philanthropy.
But how those donations are made varies. Some individuals have methodical gifting plans, while others are more organic in their approach, writing checks when the inspiration strikes and making donations at events. If you're in the latter category, taking a more strategic approach to your gifts can not only increase the impact of your dollars but also ensure you’re getting the full tax benefit from your efforts.
Here are four steps for building a gifting plan that serves your charitable interests:
1. Determine how much you can give.
Start by evaluating how much you already give to charity. In addition to any large donations you make, be sure to account for items you purchased at silent auctions or events, tickets for nonprofit fundraising dinners, and small donations made sporadically. Then review your expenses and your overall budget, and compare whether you have more room for making bigger or more gifts. Your charitable giving should come out of your discretionary funds, and not impact any existing obligations such as paying down debt or saving for retirement.
2. Make your gifting methodical and easy.
Perhaps you’ve already been gifting sums here and there. However, understanding how much you're able to gift in total and then planning for those gifts can increase their impact. For example, consider lumping your sporadic donations into one larger, more impactful gift to one of your favorite organizations. Alternately, set up a recurring monthly donation through your bank. You'll spread out your donations, but ensure the end result reflects the amount of annual support you’d like to provide to a specific cause or organization. The added benefit of making your gifting more planned and methodical: It will feel intentional, and possibly, more rewarding.
3. Find ways to elevate your impact.
If you do have a charitable intent, investigate ways for making your gifts go as far as possible. For instance, many employers have workplace giving programs, which match the donations you make to your favorite organizations. In fact, 65% of Fortune 500 companies offer some sort matching gift program. Consider gifting donations in honor of your friends and family. Instead of spending the usual $25 or $50 for a present, make a donation to a cause that’s meaningful to the recipient and yourself. Also, consider gifting assets that aren’t cash. For instance, you can donate a vehicle to a nonprofit. You can also gift securities. The latter comes with a few tax benefits: you avoid paying capital gains if the stock has appreciated since you bought it, and you can deduct the current fair market value of the securities.
4. Keep taxes in mind.
While the intention of your gifts is to help the organizations and causes that you love, tax deductions provide another positive to making donations. There are some recent changes, however, that impact donors. Under the new tax law, you need to itemize your deductions in order to claim charitable gifts deductions. If you plan to do so, keep good records of any gifts you make. The IRS will want a bank record or written statement from the charity, regardless of the amount of the gift. Also, you can only deduct gifts given to qualified charities. This IRS tool can help you check whether an organization qualifies. Finally, if you anticipate ramping up your gifting, you might consider opening a donor-advised fund. This way, you can give to the fund annually—and take the related deduction in the same year—but gift the money at any time.
By gifting to charities, you're already making a difference. Follow these steps to organize your gifting, elevate your impact and make use of related tax deductions and your gifting will go that much further.