Economic stress is all around us, from the federal government shutdown to higher grocery and health care costs. We have been incredibly grateful at IMPACT for the generosity of our donors as they are helping us continue our commitment to not turning anyone away for lack of funds.
Many people have asked, “what is the best way to support you right now?” and while the answer will always be “in whatever ways you can,” I want to highlight a few ways of giving that allow you to stretch your donation dollars further, while paying the federal government less in taxes. These are things I’ve looked into for my own giving, but of course your mileage may vary. Talk to a professional before making any decisions.
Donate Stocks Directly
If you own stocks in a brokerage account, consider gifting them directly to a 501c3 non-profit organization, rather than selling your stock and giving the non-profit the proceeds. First, I want to acknowledge that this trick is not available to everyone. Owning stocks, particularly outside of a specialized retirement account (like a 401K or IRA), involves a level of wealth privilege not accessible to everyone. But if you do, and you gift stocks directly to your favorite non-profit, you can potentially avoid paying federal capital gains taxes, get a charitable deduction in addition, and the non-profit receives the full value of the shares. Since non-profit organizations don’t pay capital gains taxes, they get the full value of the stock and without having to worry about paying taxes. Not a bad deal!
Here is a simplified example to explain how gifting stocks works. Let’s assume you bought 10 shares of Stock A at $50 each, way back when, for a total of $500. Let’s say today those shares have doubled in value, totaling $1,000, and you want to donate to your favorite non-profit. The table below shows your options:
| Scenario | Process | Result for You | Result for Non-Profit |
| Sell the stock, then donate proceeds | Sell shares for $1000Pay 15% federal capital gains tax on the $500 gain ($75)Donate remaining $925 | Owe $75 in federal capital gains taxCharitable deduction of $925 | Non-profit receives $925 |
| Donate the stock directly | Transfer shares worth $1000 to non-profitNon-profit then sells the shares | Avoid federal capital gains taxCharitable deduction of $1,000 | – Non-profit receives $1000 |
| Result: Donating the stock directly gives more to the non-profit, eliminates federal capital gains tax, and increases your tax deduction. | |||
Set Up a Donor Advised Fund
You can also set aside stocks in a special fund called a Donor Advised Fund (DAF). The concept is similar to the one I described above, but takes a longer term approach. Anything put in a DAF becomes earmarked for charitable giving. There are three major benefits. First, assets inside the DAF grow tax-free. This is like how a Roth IRA works. You’ll never pay federal capital gains tax as long as you eventually donate the stock to a non-profit. Second, notice I wrote ‘eventually’ in the last sentence. Only a small portion of a DAF must be paid out to non-profits each year. Especially for younger people, that leaves years or decades for earnings to grow tax-free, eventually creating a lot more value for the non-profit to eventually receive. Finally, you as the donor take the tax deduction when the stocks go INTO the DAF, not when they are paid out. This means you can receive a large tax deduction in the present, perhaps during a year when you might be facing a large tax bill for some other reason, so you can strategically mitigate the amount you pay in taxes.
Qualified Charitable Distributions (QCD)
If you’re over 70 1/2, you probably have a good idea about how your retirement savings are holding up. If you have extra funds in an IRA, you can withdraw a certain amount (up to $108,000 annually!) and donate those funds to a non-profit tax free. People at this age are required to withdraw some of their retirement assets anyways, due to Required Minimum Distributions (RMD), and a qualified charitable distribution can count towards your RMD.
Check if Your Employer Offers a Company Match
Many large companies will match personal donations, either up to a certain amount or during a specific time of year. While every company has a different process, many times this is managed through a platform like Benevity. The non-profit must be registered and certified through the platform first. IMPACT is certified through Benevity. If your company offers a matching donation, but you don’t see IMPACT listed as an option, please reach out to us so we can get on their list!
Donate the Old School Way with Checks or Cash
Up to 5% donations made with a credit card are eaten up by processing fees. Putting a check in the mail ensures that 100% of the value goes straight to the non-profit. At an in-person event? You can donate cash, and get a receipt on the spot. Venmo (when using a business account), PayPal, and Facebook Giving also have sneaky fees that cut into the amount the non-profit receives. Just being aware of these things can help to ensure your donations actually go to help the people you intend, not to fund banks or mega-corporations. Even if you typically pay extra to cover these fees, why not keep that money for yourself?
There are still ways to stretch a dollar while supporting the causes you care about. There are so many people that need your help right now. There’s no better time to put your values into action.
**This is for information purposes only. No one at IMPACT is a certified financial professional, nor is anyone giving investment advice. Always talk to a financial professional to discuss your specific situation.**