As the holidays and end of year quickly approach, many people turn to thinking about charitable gifts. The Thanksgiving and Christmas season is a popular time for charitable giving, both for expressions of gratitude and giving as well as income tax deductions for the current calendar year.
The most universal guideline of how much to give to charity is the biblical principle of tithing 10% of your income.
Develop a Charitable Giving Plan
Ideally, you should first develop a plan for how much to give and to what organizations or causes. Ideally, the amount you give will be commensurate with your income and assets, so the higher your income and assets, the higher your charitable gifts are as a percentage of your income and assets. The most universal guideline of how much of your income to give to charity is the biblical principle of tithing 10% of your income. As always, the best advice is to set a goal and have a plan.
Cash (in reality, money given via checks and credit cards) is the most common form of gifts. (We are addressing financial gifts here, but gifts of time and services are equally important.) If you have appreciated stocks or mutual funds, however, giving appreciated securities has an additional benefit: avoiding capital gains tax. If you give an appreciated investment to a tax-exempt charity, they can sell the investment and convert it to cash without paying any capital gains tax.
Giving appreciated stocks or mutual funds to charity can become administratively difficult if you give to multiple charities during the year. An attractive option is a donor-advised fund (DAF) at a community foundation, such as The Greater Cincinnati Foundation. Many communities have a community foundation. A DAF offers tremendous ease and flexibility. You can make one gift to your DAF at the community foundation and then request that grants be made to your list of charitable organizations. A DAF also allows you to separate the timing of gifts for tax purposes. For example, you can make a gift to your DAF this year for the income tax deduction, and either request grants to your favorite charities this year or in the future. A DAF also allows your stock or mutual fund to be sold and invested in a more diversified portfolio pending future distributions to charities.
Consider a Donor-Advised Fund
We are happy to help you learn more about a donor-advised fund at a community foundation. There are many uses and advantages of a donor-advised fund at a community foundation and we have only highlighted a few of them here. Most important, develop a goal and a plan for your charitable giving—it's the gift that keeps on giving.