As the year ends, instead of looking ahead to the future, many people are watching the edge of the rapidly approaching “fiscal cliff”. While no one knows how it will all turn out, one thing is certain: tax deductions for charitable contributions will be less next year than they are this year. That makes an end of year gift in 2012 to your favorite charity a really smart financial strategy. Since the tax laws may soon change, it’s especially important this year to understand when to give, what to give and how to give as you contemplate making year end gifts.
While the focus of end of year giving is to take advantage of tax benefits, the real reason for giving is because you believe in the mission of the organization you help with your gift. That’s the source of greatest satisfaction—knowing that you have made it possible for an organization to continue to do good in the community and to make a daily difference in the lives of the clients they serve.
It’s not too late to work with your favorite non profit and your tax adviser to find strategies for giving that result in benefits to everyone—you, the non profit, and people in need.
When to Give
If you itemize deductions, the charitable gift is deductible in the year it is made. That means that any gift given by 11:59PM on December 31, 2012 will result in tax savings on this year’s tax liability. Many charities tell stories of donors walking through their door on New Year’s Eve with a check in hand and an expression of panic on their face.
When I was working for United Way, we made a special effort to have staff onsite on New Year’s Eve afternoon and netted hundreds of dollars in walk in gifts. The Community Foundation had the same experience last year when they received a significant gift from a new donor on the last day of the year.
The effective date of the gift is the date it was either hand delivered or postmarked. So pay your favorite non profit a New Year’s Eve visit and make your gift in person to ensure that you will get a receipt dated before the New Year.
- Gifts of cash are easy to give.
- Organizations can use these donations to meet immediate needs.
- Some organizations may also permit large gifts to be designated for specific uses.
- Cash gifts may be deductible up to 50% of your adjusted gross income.
- Gifts of securities or other investments that have been held for more than one year can become a significant gift to a charity at a lower cost to the donor.
- The charitable deduction for the donation of these stocks is based on their fair market value on the date of the gift.
- But you avoid all federal capital gains tax that would otherwise be due on a sale of the assets.
- Gifts of security require careful timing. Work with your broker to find the best solution for you and the nonprofit.
You’ll learn more about the financial side of year end giving in part two of our year end giving series.
Where to Give
- The Community Foundation Huntsville/Madison County: Their mission is to increase giving in the Huntsville/Madison County community. Their objectives are to educate donors about the tax benefits of giving and provide tax advantageous avenues for giving.
- United Way of Madison County: The purpose of United Way of Madison County is to help those least able to help themselves by uniting volunteers and resources in the community, and to solve community problems and address education, income, and health needs through the programs of our Collaborative Partners.
- Our Valley Events nonprofit sponsors: Our Valley Events was launched in 2009 with the support of Madison County’s nonprofit community and 20 sponsors, who needed a way to prevent overlapping fundraisers as well as communicate events to the public. Today, Our Valley Events continues to work with these nonprofits.
Happy New Year and Happy Giving!
Photos curtsey of Flickr user Images_of_Money
About the Author
Jennie is the executive director of the ELM Foundation. She holds a Doctorate in Consumer Behavior from Purdue University. Clients include Fortune 500 companies, high tech businesses, hospitals, financial institutions and non-profit organizations. Her work in Huntsville/Madison County includes Personal Best Training & Development, United Way of Madison County, The Community Foundation of Huntsville/Madison County, and Huntsville City School Board of Education.