‘Tis the season for charitable giving
Christmas time: “’Tis the season to be jolly.” And for so many of us, also charitable, the spirit of giving and of end-of-year charitable income-tax deductions. It’s a warm-fuzzy grat, knowing that we’re doing our share of altruism, isn’t it?
Whether it’s cash -- a stack of modest to OMG!-sized checks to OLLI, the church, the United Way, the school band travel fund, and the food bank, -- or be it merchandise, a bagful of canned goods to Help-4-Kids, a rideable bike and an armload of outgrown clothes to Goodwill -- or be it a few hours’ hands-on volunteer time -- we bask ourselves in the sunshine of joining our fellow human beings in assisting the less fortunate and in joining noble causes. Our simple, modest outreaches to our “nears and dears” are equally as important to us as mega-millions foundation endowment grants enabling powerful infrastructured institutions are to their billionaire benefactors. Rightly so, right?
In our country, charitable giving, aka philanthropy, indeed is big-time. The National Philanthropic Trust reports that Americans gave a breathtaking $ 373.25 billion in 2015, 2.1 percent of our gross national product, to our million and a half charitable entities, and that’s even a 4.1 percent increase over 2014. Isn’t it heartwarming to learn that almost three-quarters of that came from individuals and families like you and me? But, also happily, nearly five percent that came from the corporate sector, businesses that we buy things and services from, and therefore some of our altruism is there, too. Foundations, large and small, contributed about fifteen percent.
That’s just the cash, alone. What about the who-knows-how-many dollars’ worth of non-money donations, and the estimated eight billion hours per year of volunteer service estimated value of over $ 175 billion?
Care to think even bigger? NPT says that historically philanthropic giving has risen whenever GNP has. That figures, doesn’t it? But, that’s only a third as much as the stock market’s rise. Even so, in the first half of the twenty-first century, well over $ 55 trillion could become charitable gifts, even more than the value of the wealth that will pass down from one generation to another.
What do we donate to? In 2015, says NPT, the biggest beneficiary, a third, was religion. What does that say to those who exclaim that religion is fading away? Education follows, at 15 percent, human services at 12 percent, foundations that fund all sorts of projects at 16 percent, and health services and research at 8 percent.
Besides corporate donations partly funded by us customers’ payments for their goods and services, we also contribute indirectly in other ways that we don’t think about, and aren’t income-tax deductible, either. For instance, how about the increases in vendors’ employee health insurance premiums that are caused by the hospitals and doctors raising their fees to cover the cost of free and discounted care that they give to patients who can’t afford to pay, those employee insurance premium increases in turn passed on to us in the form of higher prices? And, for the same reason, plus the fallout impact on Medicaid costs, how about our own rising Medicare premiums and increasing deductibles?
Besides cash, grants, “seed-money” loans, merchandise and volunteer time, many of us utilize some other useful and beneficial vehicles to transfer wealth, even moderate amounts, to philanthropy. In our estate, financial, and tax planning, we create value that otherwise wouldn’t exist, and we address our and our families’ well-being as well as benefiting the charities. We do that via life insurance, charitable gift annuities, charitable remainder unitrusts, charitable remainder annuity trusts, charitable lead trusts, specific and residual bequests and specified distributions of money and property from our personal trusts, and family foundations.
Charity Navigator is a marvelously professional service, doing quality analysis and research about the philanthropy industry. A hugely welcome service is its really intelligent charities ratings. Before you decide to benefit an organization, CN can tell you how helpful, or wasteful, or self-serving it really is. We’ve discovered some distressing surprises there. You might, too. www.nptrust.org. And let’s also note that CN’s a non-profit public service foundation, too, certainly a deserving destination for some of our giving.
Of course, there’s the other warm-fuzzy grat: Thanks to our legislators who long to be re-elected, and to the non-profit industries’ aggressive lobbying efforts, we get to income-tax-deduct -- federal, state, and local -- much of our philanthropy to a vast array of donees. Ah, the joy of giving and receiving at the same time!
Sure, we’d be charitable without income tax deductions, but indeed many give much more because of them! Encouraging charity always has been sacred public policy, and it surely enables benefits to the needy and the deserving that government might otherwise have to cover. An organization is eligible if it’s in one of the public-policy-favored sectors, applies for (really solid data about itself and its potential to deliver benefit is required) and receives approval. States and local tax authorities generally accept federally-approved credentials. The broadly-inviting-eligibility sectors are:
▪ Churches and other religious organizations.
▪ Tax-exempt educational organizations.
▪ Tax-exempt hospitals and medical research organizations.
▪ Government units, such as states or a local subdivisions.
▪ Pubicly-supported agencies, such as community foundations.
▪ Certain private foundations that distribute all the contributions received to public charities within 2-1/2 months after the end of the foundations’ fiscal years.
▪ Private operating foundations that pool all donations into common funds.
▪ Certain membership organizations that rely on the general public for more than a third of their contributions.
Why’s that list important? Because some organizations are not eligible, even if they’re tax-exempt, for example foreign charities and governments, and some private foundations that don’t meet the tax law’s and IRS’s legitimacy criteria.
Of course, let’s max our legitimate opportunities to deduct. Charity Navigator says that we can deduct donations to qualified (if you’re not sure, insist on proof!) recipients up to 50 percent of our “adjusted gross income” in the year the check is mailed or the credit card charge is posted. And if it doesn’t exceed 20 percent in some cases and 30 percent in others, we don’t have to worry about the miriad of other tax-cheating-prevention rules. In a 35 percent tax bracket, the highest, itemizing our deductions, a hundred-dollar gift costs us only sixty-five, 15 percent, only eighty- five. So, we can give the tax savings, too.
Some sensible rules apply to non-cash contributions, too. If you’ve owned the property for more than a year, the deductible value is the “fair market value”, so you can donate appreciated value and take a deduction higher than the price that you paid for it, avoiding tax on the gain. Always get a receipt for non-cash donations. Appraisals are required for merchandise that’s no longer in good condition that you claim a deduction of $ 500.00 or more for. Proof of the year and the amount of cash donations are vital, too. And if your gift has “strings” attached, or is via your charitable trust, watch out for the “attribution rules”, denying deductions because you retained too much control over the money.
More info: IRS Publication 526, “Charitable Contributions”, available on-line at IRS.gov, your tax attorney and/or accountant, and your favorite substantially-sized eligible institutions’ no-fee-to-you professional planned giving consultants.
And, with all of that, may you and all whom you love, including your favored charities, enjoy the season!
This story was originally published December 25, 2016 at 3:28 PM with the headline "‘Tis the season for charitable giving."