Charitable donations generally kick into high gear on “Giving Tuesday,” a single day specifically focused on charity in the shopping-heavy week after Thanksgiving.
Since its start, the #GivingTuesday effort has raised more than $1 billion online in the U.S. alone.
And yet, the new tax law has taken its toll.
In terms of total dollars, giving is at an all-time high. However, the percentage of Americans who donate to charity has gone down, according to Una Osili, associate dean for research and international programs at the Lilly Family School of Philanthropy at Indiana University-Purdue University Indianapolis.
The decline in giving by individuals comes after the new tax law, which took effect in 2018, reduced the tax incentives of giving for many households.
“Dollars up, donors down,” she said.
The decline in giving by individuals came after the new tax law, which took effect in 2018, reduced the incentives for many households. The law doubled the standard deduction for families, meaning far fewer households itemized and took a separate deduction for charitable donations.
Last year’s fourth-quarter losses in the stock market also played a role, according to a report by the Chicago-based non-profit Giving USA.
With fewer people giving, it’s even more important to make the most of those donations and build up from there, according to Peter Lipsett, a vice president of DonorsTrust, a donor-advised fund based in Alexandria, Virginia.
“Charitable giving is a habit, it is a muscle you build,” he said. “The more you engage in it, the better you are going to get.”
But first, “there’s an inertia to not giving that people have to overcome,” he said. Here’s how:
Where to give
Before giving a dime, look to see how a group stacks up at rating sites such as CharityWatch.org, CharityNavigator.org or the Better Business Bureau’s Wise Giving Alliance. Those sites assess criteria such as how transparent a nonprofit is about its finances and how much of its budget goes toward programs.
ImpactMatters, a nonprofit backed by the Gates Foundation, rates nonprofits based on their social impact — how much good a nonprofit achieves per dollar of cost.
For example, at the five-star rated New York Common Pantry, a donation of $25 provides a meal to 31 people in need, according to the site.
“Donors want to be close to the action,” said Kevin Washington, the YMCA’s president and chief executive officer. “You have to show them results.”
Finding out more about a charity and how funds are distributed helps donors become more engaged with the cause, he said. “They are learning about the organization and their resources will follow.”
How much to give
On average, American households gave $2,514 to charity last year, a number that has largely held steady despite recent gains in income and overall wealth.
Jane Greenfield, the president of Vanguard Charitable, recommends building philanthropy into your budget as a way of prioritizing those dollars and then stretching that number a little bit further every year.
“That way you will continue to progress,” she said.
To get a good benchmark on where to start, Generosity for Life has an online tool that factors in income, geographical area and age to provide a guideline on how much to give relative to your circumstances.
“It really is looking at your own personal situation but also the issues you care about in the world,” Lipsett added.
“Giving isn’t just about how many dollars but how much you are trying to change the world,” he said. “How much is that worth to you? The amount we are giving should be viewed through that lens.”
How to reap the benefit
Although the tax law reduced the tax incentives of giving for many households, there are still ways to maximize your tax savings.
For starters, if you itemize on your taxes – meaning your deductions exceed the 2019 standard deduction of $12,200 for singles and $24,400 for married couples – you can write off the value of your charitable donations.
If you need a boost to surpass this new, higher standard deduction, consider saving money over time and donate every two or three years instead of every year.
One way to accomplish this is with a donor-advised fund, which lets you make a charitable contribution and receive an immediate tax break for the full donation, and then recommend grants from the fund to your favorite charities over time.
High-income earners in particular would do well to consider a non-cash donation — such as appreciated stock or part of a required minimum distribution from a retirement account — specifically because of the tax advantages.
Doing good is its own reward, but reaping the tax benefits is a nice perk.