The meaning of life is to find your gift. The purpose of life is to give it away.
– Pablo Picasso
This year marks the 10th anniversary of the ALS Ice Bucket Challenge, a fundraising campaign that offered us the choice of having cold buckets of water poured on our heads (remember the videos?) or donating to ALS research. Many people chose to do both and, according to the ALS Association, the campaign raised $115 million for ALS research. The Ice Bucket Challenge lived online, serving as early evidence of the power that smartphones and social media would come to have over the way some people approach charitable giving.
A decade later, technology continues to change charitable giving, yet many of the old-school ways of giving are still quite popular. So as the holiday season approaches and you start to think about donating to your favorite charities, let’s review some classic approaches to charitable giving and learn about newer, technology-enhanced ways to help others.
Old-school Charitable Giving
If you are fortunate enough to be in a position to give this year, consider choosing one of the following conventional avenues for charitable giving, each of which has its own tax benefits:
If you own securities that are worth significantly more than you paid for them, you might want to gift these to a charity instead of making a cash gift. By gifting the securities, you can avoid capital gains taxes on the appreciated shares, and if you itemize on your tax return, you might still be entitled to a tax deduction for the gift.
If you are obligated to take a required minimum distribution from a retirement account, you have the option to send all or a portion of the distribution directly to a charity, up to a limit of $105,000 per year in 2024. Your taxable income is reduced by the amount sent to the charity, and you can “double dip” on deductions because you are still able to take full advantage of the standard deduction if you do not itemize. Even if you are not obligated to take a required minimum distribution, you can still make direct, non-itemized charitable contributions from your IRA if you are over 70½.•
A DAF essentially functions as a charitable middleman, and it is an efficient way to create a family philanthropic legacy. You get tax benefits in the year that you make a charitable contribution to your DAF, and you request distributions to be made from your DAF to the individual charities of your choice at desired times in the future. Many types of DAFs are available, including some with no account minimums. As a side note, you cannot make a QCD to a donor-advised fund.
Modern Charitable Giving
The preceding techniques are usually (but not always) implemented as part of a comprehensive financial planning strategy for individuals who are financially established and plan to donate large sums of money. If you plan to donate more modestly or are trying to teach your tech-savvy children or grandchildren about the importance of giving, you might find the following modern charitable concepts helpful:
Many individuals in poor and developing countries lack access to traditional banking services. The field of microfinance alleviates this obstacle to economic growth by providing microloans to small entrepreneurs or even entire villages. Kiva, a leader in this space, is an online lending platform that connects borrowers with people willing to make loans as small as $25. Although the contributions are not tax-deductible, you are giving to a great cause.
If you have made a retail purchase in which you rounded up your total to the nearest dollar, with the excess amount going to a charity, you have made a micro donation. But if giving 48 cents to a charity on your way out of the grocery store does not make you feel particularly generous, you might prefer RoundUp App, a platform that allows you to automatically make small, recurring donations to a charity of your choice.
During the holidays, we often remark how difficult it is to buy thoughtful gifts for our loved ones. What do you give to the person who has everything? The nonprofit organization Changing the Present has the answer: Rather than giving your friends and family more “stuff,” make a charitable donation in their name instead. And if you do not want another gift card or scented candle for the holidays, ask your loved ones to use Changing the Present’s platform to make a donation in your name to your favorite charity.
The older, classic ways of giving are still as effective as ever, but the newer, technology-based platforms are easier to implement, plus they satisfy our dopamine-induced need for immediate gratification – in a good way, for once. The old and the new are not mutually exclusive: Kiva accepts gifts of appreciated stock, and you can use a qualified charitable distribution to make a charitable gift in a loved one’s honor. And, in case you have not seen it yet, the ALS Association is encouraging you to take part in their Ice Bucket Challenge 10th anniversary fundraiser this year, so now is your chance to pay up or get frozen for a great cause.