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SAN FRANCISCO--(BUSINESS WIRE)--October 28,
2008--With turmoil on Wall Street causing many
to wonder how they can continue to support
their favorite charities, Schwab Charitable
released today a series of tips to help donors
stretch their charitable budgets — even in
tough economic times.
Past economic downturns have cut deeply into
nonprofit bottom lines precisely when demands
for services have increased. During two
economic declines, 1973 and 2001, donations
failed to keep pace with inflation for three
straight years – 1973-75 and 2001-03. 1 This
year, with markets down more than a third and
a fairly significant recession all but
assured, it may feel difficult to sustain past
charitable giving habits. But with some
planning, you can make donations go further
and support the nonprofits that are most
important to you even during an economic
downturn.
“The key is to leverage your time, money and
tax planning to maximize impact,” said Kim
Wright-Violich, president of Schwab
Charitable, one of the country’s largest and
fastest growing national donor-advised fund
organizations with 12,000 donors and nearly $2
billion in assets.
Here are eight tips to help make a charitable
difference in tough economic times:
1. Maximize tax planning: Charitable
giving can help reduce income taxes, estate
tax and capital gains tax, so it is crucial to
think about how you can best leverage tax
rules to expand your philanthropic impact. Two
basic rules include itemizing deductions on
your tax return if you plan to deduct
charitable contributions and requesting a
receipt for donations of $250 or more to a
single charity. Since the tax aspects of
charitable giving can be complex, it is a good
idea to consult with a tax professional.
2. Give Appreciated Securities: Even
with stock prices down significantly, many
investors have securities (stocks, mutual
funds) worth more than they paid for them. You
may want to consider transferring some of
those appreciated securities to charity.
Giving the securities to charity--rather than
selling them and donating the cash from the
sale--enables you to avoid the capital gains
tax liability which would be due if you sold
them. If you’ve held the donated securities
for a year or more, your income tax deduction
will be based on the appreciated fair market
value at the time of donation.
3. Donate Cash:Cash donations may still
make the most sense if the only securities you
currently hold were purchased less than a year
ago or have depreciated. Generally, if you
donate securities with unrealized gains you’ve
owned less than a year, your deduction would
be limited to just what you paid. If you are
donating securities worth less than the amount
you paid for them, sell them first and then
donate cash in order to lock in the losses to
offset other taxable gains. Make sure you
retain a canceled check or a receipt from the
charity in order to deduct the donation.
4. Donate unusual assets: Often
overlooked, retirement accounts and life
insurance policies can also be tapped for
charity. You may designate a charity as the
beneficiary of your life insurance policy or
make a gift of the policy itself. Or if you
are 70 ½ or older you can make gifts totaling
up to $100,000 a year from your IRA to
qualified charities without incurring income
tax on the withdrawal. This provision
originally expired at the end of 2007, but was
renewed through the end of 2009 as part of the
Emergency Economic Stabilization Act of 2008.
While most public charities are eligible to
receive distributions from an IRA, this new
rule does not apply to donor-advised funds,
supporting organizations or private
foundations.
5. Open a Charitable Account with a
Donor-Advised Fund Organization: If you
have appreciated assets to give that you’ve
held a year or longer, but don’t want to give
them all to one charity or all in this
calendar year and prefer to spread your giving
over multiple organizations and years,
consider opening a Charitable Gift Account.
These accounts allow you to contribute when
you feel the conditions are right, receive an
immediate tax deduction for doing so, and then
make smaller grant nominations to numerous
charities over time. They also have an added
bonus; they act as a charitable reserve that
can be tapped during economic downturns. The
minimum contribution for most donor-advised
fund accounts is $5000 and the minimum grant
is typically $100.
6. Set priorities: If assets have not
been previously set aside, make a decision
about whether to cut back on your charitable
contributions in a uniform way (for example,
reduce all previous contributions by 5%) or
focus your giving by setting priorities and
identifying your “nice to give to charities”
from your “have to give to charities”. The key
is to be strategic, not impulsive.
7. For those who have existing
endowment-style philanthropic vehicles such as
a Private Foundation or Supporting
Organization: Consider giving a higher
percentage in grants than in previous years
and letting the asset level drop lower than
you would normally. Another option is to
consider pledging a small portion of your
endowment for use by a microfinance
organization to secure loans to struggling
entrepreneurs in some of the world’s poorest
regions. This approach may be expanding to
donor-advised funds as well. For example,
Schwab Charitable Fund, one of the largest and
fastest growing donor-advised fund
organizations in the country, recently
announced a new microfinance guarantee program
that allows donors to recommend pledges of
assets in Charitable Gift Accounts to
guarantee loans to the world’s neediest
entrepreneurs. Regardless of the funding
source, these types of guarantees help expand
the availability of and lower interest rates
on small loans to businesses in the developing
world.
8. Give time and expertise: Sometimes
giving our time and talents can have more
impact than making a financial contribution to
charity. As a volunteer or a board member with
a charity, you can have a direct and personal
impact on causes you care about.
“As we enter the holiday giving season, most
Americans are feeling the pinch from a slowing
economy and a declining stock market,” said
Ms. Wright-Violich. “In this environment,
charitable giving is more important than ever,
so it’s crucial to be thoughtful about your
giving to maximize the impact for the causes
and organizations you care about most.”
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