Charitable giving during a recession

6:34 AM, Jun 27, 2013   |    comments
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GOLDEN VALLEY, Minn. - Some good news in the area of charitable giving after some tough years, the amount of money donated has been inching up recently.

However, a new report finds Americans still aren't giving as generously as they were before the recession began.

While charitable giving may be a core American value, it is positively and negatively affected by the economy.

Dan Ament, Financial Advisor with Morgan Stanley joined KARE 11 Sunrise to discuss the report and some tax smart advice for those making gifts.

Charitable Giving

  • 1,537,465 - The number of tax-exempt organizations in the U.S. Source: The Nonprofit Almanac 2012
  • 9.2% of Employment Wages in U.S. - Nonprofits account for just under 10% of all wages and salaries paid in the United States.
  • $316.23 billion Gifted to Charities in 2012 - Representing a 1.5% increase from 2011 however still down 8% from the $344 billion given in 2007 when the recession began. Individuals led the giving in 2012 at $228 billion in 2012 or 72% of total giving, followed by foundations $45 billion and corporations $18 billion. Source: Lilly Family School of Philanthropy

Where the money goes (top categories)

Religion $101 billion
Education $41 billion
Human services $40 billion
Foundations $30 billion
Health organizations $28 billion
Public-society benefit organizations $21 billion

Tax policy and uncertainty affect giving - Beyond financial pressures, 2012 also saw policy changes considered at the federal level that could alter future giving, including proposals aimed at capping or eliminating the longstanding charitable tax deduction. "Although the American Taxpayer Relief Act of 2012 preserved the deduction, the publicly aired proposals may have fueled some giving decisions," said David H. King, CFRE, chair of the Giving Institute. Philanthropic giving fares best in a known environment, and has been dependent, in part, on certain factors holding true over the decades, including the charitable tax deduction," said King. "The uncertainty among donors created by policy makers' examination of the charitable deduction likely influenced giving in two very different ways in 2012. Some donors may have 'prepaid' gifts they had intended to make in 2013 to ensure they received a tax benefit, while others may have chosen not to donate out of concern that deductions for very large gifts would not carry over in 2013 and beyond."

Tax smart gifting

  • Gift using appreciated investments - If you claim itemized deductions and hold appreciated investments that you have owned longer than 12 months (long-term gain) consider gifting shares of the investment in-lieu-of cash to your desired non-profit organization. The tax benefit includes deducting the amount of the donated investment AND you avoid the tax you would have realized when you eventually sold the investment.
  • Charitable gift funds - You can also arrange to contribute long-term appreciated stock to a donor-advised fund, which is a relatively low-cost, flexible way to manage charitable giving. These are individual accounts administered by tax-exempt organizations, such as community foundations and national charities. The big advantage of utilizing a donor advised fund is that you can control the timing of your contribution (and related deduction) while retaining a level of control regarding when the distributions occur to your chosen non-profits. Consult with your advisor to determine available options to consider.

(Copyright 2013 by KARE. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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