Catha Mullen, Author at Personal Capital

Key Takeaways Focus on 1 or 2 causes where you want to make an impact. Make sure your donation will go to a qualified charitable organization with little spent on overhead. Consider donating up to 30% of your appreciated securites to avoid capital gains taxes. The following post has been updated and was co-authored by Angela Campbell, Chief Executive Officer of Agora Fund. Thanksgiving has officially kicked-off the holiday season, also known as the most charitable time of the year. In fact, the past two years charitable giving has increased 10% (using inflation-adjusted dollars) and shows no signs of going down this year. Chances are you've already been asked for contributions by no less than three non-profits. Gifts from individuals are crucial to the nonprofit sector (last year individuals gave $353 billion according to Charity Navigator) and can be extremely beneficial to reduce your taxes. But many individual donors aren't optimizing their gifts - meaning, their donation dollars are not leveraged to achieve maximum social impact and their giving strategy is not in sync with their broader financial strategy. However, improving the impact of a donation doesn’t require giving more – it requires giving wisely. By treating giving as part of your financial plan - with a clear strategy, goals, and an eye towards impact - your donations can be both globally impactful and personally beneficial. Here are four ways to help improve your giving strategy this year. 1. Begin With Your Goal In Mind In the world of giving, the word legacy comes up all the time. How do you want to leave your mark on the world? The first step in determining your giving strategy is to define the end-game. Reflect on what you want your legacy to be and the causes that matter most to you. Giving can often be reactive – a friend asks you to donate to support her participation in a marathon, your alma mater calls for your annual contribution, or a nonprofit drops you an email about setting up a tribute fund. These are all wonderful reasons to give, but to really align your results with what you care about, it pays to be strategic. 2. Focus On Results The second step to giving wisely is to select nonprofits that align with your goals. If you seek to maximize impact, focus on long-term results and evidence of success. By doing so, you avoid funding nonprofits whose budgets are eaten up by costly marketing campaigns and start driving real change in the world. As individuals with busy schedules, we have a limitation that foils our best intentions to give wisely: time. Evaluating and selecting nonprofits is time and labor-intensive, particularly when many nonprofits do not publicly report key metrics. Before donating, make sure the organization registers as a qualified non-profit. Given the opaqueness of the nonprofit world, younger generations are increasingly demanding transparency and results. Those of us ages 19 to 49 are nearly twice as likely as prior generations to focus on understanding the "return on investment" of our donations. 3. Determine How Much To Give How much to give is a personal question. Some of the world’s wealthiest families have committed to giving away the majority of their wealth. Warren Buffet kicked off the Giving Pledge in 2006, committing to give all of his Berkshire Hathaway stock – 99% of his wealth – to charity. Not all of us can afford to give so much. The Giving Pledge, of course, is for billionaires. Most of us give about 3% of our adjusted gross income (AGI) per year. As shown in the chart below, giving patterns follow an inverse bell curve: as a percentage of their income, households with the highest and lowest income give the most. In reality, to hone in on the right donation number, we need to take into account what we make, what we save, and whether our financial condition is sufficient to meet our ongoing financial needs. 4. Capitalize on Your Tax Benefits Paying attention to tax benefits can give serious leverage to your giving dollars. Charitable deductions are a gift from the IRS that enable us to deduct up to 50% of our AGI during the tax year a donation is made. You can capture another tax benefit by giving appreciated securities. The benefits of doing so are twofold, 1) don’t pay capital gains tax on the appreciation of those securities, and 2) you can deduct the full fair market value of the securities (but only up to 30% of your AGI). To use a simple example, suppose you decided to give $3,000 this year – 3% of your $100,000 income. If you opted to give stocks that your parents had bought for you as a child (let’s say they invested $1,000, which is now worth $3,000), here’s what your tax savings would be: $900 of saved federal income tax (assuming a 30% tax bracket) $300 of saved capital gains tax (assuming a 15% capital gains tax rate) In this scenario, by giving appreciated securities and itemizing your deductions, you may immediately get a 40% boost in the impact of your dollars. For those of you who are already taking withdrawals from our IRAs, you’ve got another alternative: if you are at least 70½ by year's end, you can elect to have all or part of this year’s IRA distribution go to charity, up to $100,000 per year. The tax benefit: you won't owe income tax on the distribution (but you do not get a deduction). Gifts All Around Whether you're considering giving cash, donating online, or signing checks as a charitable donation this year, it's important to keep your money's true impact in mind and give wisely. A giving strategy can be both mutually beneficial and more effective if it’s considered in the context of your financial goals and investing strategies. So before draining your wallet this holiday season, talk to your financial advisor about the best giving strategy for you and your family. About Agora Fund: Angela Rastegar Campbell founded Agora Fund in 2014 with the goal of building a more transparent marketplace for giving. Agora’s digital platform enables you to determine your giving strategy and ‘end goal’ by matching the causes, regions, and approaches you care about to a custom portfolio of nonprofits. Angela and her team evaluate charities through a rigorous, quantitative process, selecting less than 1% to include in their platform. Individuals receive custom impact reports on the nonprofits in their portfolio. Additionally, Agora helps you capitalize on tax benefits. Individuals who experience a windfall or income spike can frontload donations to their account where funds are held for future giving, and can also donate appreciated securities. Image credit: Courtney from Flickr Creative Commons

Catha Mullen

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