Americans made $3.6 billion in charitable donations this week — a double-digit increase of 16% from Giving Tuesday 2023’s total of $3.1 billion, according to The GivingTuesday Data Commons, the group that tracks the data. And more people than ever — 36.1 million — donated to a charity that day, up 7% from last year.
Add this to the mix: Giving by individuals is predicted to increase by 2.6% in 2024 and by 3.4% in 2025, surpassing previous annual average giving bumps, according to research from the Indiana University Lilly Family School of Philanthropy.
That feels good.
As we slide into December, many of us who bypassed the much-hyped Giving Tuesday, me included, are focusing on making charitable contributions by year-end to reduce taxes or simply revel in that holiday spirit of giving.
For me, and I suspect lots of you, giving is really more about your heart than a tax strategy.
People have similar motivations for giving, according to Fidelity Charitable’s research: making a difference, giving back to their community, and faith are aspects of financial giving donors find most rewarding.
For Shannon Bonney, 26, that’s the case.
Last year, she became a member of Many Hands, a nonprofit philanthropic “giving circle” with a membership of around 275 women. The collective giving organization supports nonprofits in the Washington, D.C., area focused on women, children, and families in socioeconomic need. Members under 35 make an annual gift of $300. Older donors contribute a minimum annual gift of $1,000.
Donating through a giving circle, where individuals, often women, pool their funds and their decision-making to make grants, is the hottest trend in philanthropy. Per a report from Philanthropy Together, the number of giving circles and the number of people who are part of one tripled between 2007 and 2016 — and then tripled again between 2016 and 2023. There are now more than 4,000 giving circles across the country with 370,000 members. Among them, they gave away more than $3 billion over a five-year period ending in 2023.
“I chose a giving circle because it’s the most effective way to pool money with people and then get that in a lump sum to the organization,” Bonney said. “It’s a lot more impactful to have your money be part of tens of thousands of dollars that are going to that group.”
The amount of giving per member varies by giving circle. Some circles set a lower giving level that can range from $200 to $500 annually. Others opt to set it higher, say, $5,000 to $25,000 a year. (The Giving Compass site has a Giving Circle search tool to find ones near you focused on missions of interest).
Most of us don’t know much about nitty-gritty tax strategies that could make our donations more financially impactful.
To write off donations, your total tax deductions need to exceed the standard deduction to be worthwhile. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.
The tax deduction is a lure for most Americans, with retirees marginally less likely than others to say it’s important to their giving decision.
One way to exceed that standard deduction threshold is to bunch together your contributions and give two years’ worth of deductions in one year, so your total giving will be high enough to allow you to itemize.
“This can be extremely effective for gifting in years of higher-than-normal income — for example, if you sold a business or real estate, received a large bonus payout, exercised stock options, or sold and diversified a concentrated low-basis stock position,” Brandon O’Neill, a certified financial planner and charitable planning consultant at Fidelity Charitable, told Yahoo Finance.
Another tax-saving strategy is making a charitable donation of stocks, ETFs, or mutual funds you’ve held for more than a year. This is a way to avoid owing capital gains taxes on their profits.
You might also consider a donor-advised fund (DAF), which is available from financial services firms like Fidelity, Schwab, and Vanguard. There could be minimum amounts to open an account and to give to an individual charity along with annual administrative fees.
When you make a contribution of cash, stocks, mutual funds, or ETFs to a DAF, you immediately receive a tax deduction, provided you itemize. You can then invest the money for growth that is tax-free until you choose which charities you want to donate to.
These funds are going mainstream but are still under-the-radar for many Americans.
“A DAF is a simple, tax-effective way to dedicate money to charitable giving,” O’Neill said. “You can think about DAFs almost like a 529 or IRA for charitable giving because they allow you to strategize your giving.”
People have similar motivations for giving, according to Fidelity Charitable’s research: making a difference, giving back to their community, and faith. (Getty Creative) ·Jose Luis Pelaez Inc via Getty Images
You make this distribution directly to a charity, reducing the amount of your taxable IRA that is subject to Required Minimum Distributions starting at age 73. You can’t deduct the qualified charitable distribution, but the money won’t be considered taxable income to you.
“The year-end retirement account balance is key to retirees because their required minimum distribution is based on that balance,” Ed Slott, a certified public accountant in New York and an expert on IRAs, previously told Yahoo Finance. “Your RMD is your best asset to give to charity.”
This year you can donate up to $105,000 total to one or more charities directly from a taxable IRA.
“You are getting it out at zero tax and giving it to a charity, something you would’ve done anyway,” Slott said. “Plus, if you do it correctly, with the timing of it, it can offset your RMD.”
