The going has been rough for many nonprofit organizations.
Turbulent economic conditions, concerns about inflation, and challenges in the banking sector are just a few of the factors that are causing donors to be more financially conservative and perhaps begin to evaluate whether to keep their charitable giving at the levels of years past.
At the same time, many of you deeply understand the need to support the nonprofit sector and continue giving to the charities you love. Philanthropic support to these organizations is critical to maintaining and improving the quality of life in our region. This is especially true as the number of households giving to charity has declined by more than 16% over the last three years.
As we head into the summer months, it’s a good idea to begin thinking about your charitable giving budgets for 2023, and in particular, evaluate the types of assets that are best suited for you to give to charity. In some cases, it will be best for you to give cash. In other cases, stock will be more appropriate.
For example, as interest rates and inflation continue to increase your concerns about household finances, you may decide that preserving cash is a priority. This means that some of you who have typically given cash to your favorite charities or donor-advised funds at the Community Foundation may be reluctant to do so this year.
There’s a silver lining here because giving appreciated, publicly-traded stock to charitable organizations is a highly effective tax strategy in any economy. This is because capital gains tax is avoided when you transfer long-term, marketable securities to a fund at the Community Foundation or other public charity.
You are typically eligible for an income tax deduction at the fair market value of the securities, and when the Community Foundation sells the securities, the Community Foundation does not pay capital gains tax. This is a win-win.
And even in a rocky stock market, not all stocks are down. Many of you are no doubt holding long-term stock positions that have appreciated substantially since you bought them, even with the current stock market malaise.
For some of you whose portfolios are down significantly, this may be a year to consider contributing cash to a donor-advised fund instead of donating highly-appreciated stock (which may have been your go-to gift for so many of the last several years). Gifts of cash could reduce the burden on your personal stock positions that may have fallen in value dramatically, giving these positions more time to recover value and, at some point in the future, be contributed to a donor-advised fund at a higher value (thereby resulting in a higher tax deduction for you).
Overall, in turbulent times like this, donor-advised funds at the Community Foundation can come in especially handy. Now is the time to think about charitable giving if you regularly added to your donor-advised funds throughout the market’s long bull run. If you intend to ride out today’s market conditions in your personal portfolio, an up-and-down stock market doesn’t mean your 2023 charitable giving must take a hit. You can use your donor-advised fund to support your favorite organizations, sometimes even at levels consistent with prior years.
As always, please reach out to the community foundation to discuss options for your charitable giving. We are happy to help you achieve your goals, even in a year as bumpy as 2023 appears to be!