The end of the year brings with it many associations for different people and businesses. Some are more personal – holidays, family, introspection – and others more pragmatic – myriad deadlines, increased consumer activity. The association that I’d like to focus on combines both aspects, which come together to make this the most important time of the year for many of the more than 800,000 charities in the United States: year-end giving.
Since the adoption of §170 of the Internal Revenue Code in 1917, donations from tax-paying entities to qualified charities have served not only as the primary source of support for these groups, exceeding $316 billion in 2012, but also offer an incentive for the donor by reducing tax obligations. As if providing critical support for the work of charities in our home neighborhoods and around the world weren’t reason enough to give, individuals can generally deduct up to 50% of adjusted gross income for cash gifts, 30% for property, and 20% for appreciated capital gains.
Businesses can also often reduce their annual tax obligations by making qualified charitable gifts, though the rules can be more complicated. An introduction to charitable giving for small businesses from the U.S. Small Business Administration can be found here. In all cases, when in doubt, you should contact your accountant or tax attorney.
Besides the convenience of being better able to calculate the reduction to your annual tax obligation, year-end giving can offer other benefits to businesses as well as individuals: by supporting local charities through annual pledges, sponsorships or hosting fundraisers, donors can increase their visibility in their community and network with potential customers, clients and partners.
Year-end giving has become such a tradition that often donors can find themselves overwhelmed with appeals and options. Even if you want to keep your donations local, a community such as Arlington offers well over a hundred charities (including these Chamber member nonprofits) whose work is focused right here. Many donors are familiar with their favorite groups, but for those who aren’t or who are looking to expand their scope, the process can be daunting. With hundreds of thousands of choices for charitable giving, where should one start?
A good starting point would be some basic internet research – a charity’s website may tell you a lot about its work, and their social media presence can keep you updated as to their events. Websites such as Charity Navigator and GuideStar (both run by nonprofits) can be good resources for more in-depth research; they both publish many good articles about the best practices in giving, and even offer comparative rating of some charities.
For those who want to maximize the impact of their giving, it may be just as helpful to consider what not to do – this interesting blog from Freakonomics offers an economist’s take on how to avoid some common bad habits when it comes to year-end giving and how to easily determine where your money will be best spent.
Whether you are giving as an individual or a business, I hope that your year-end giving will be rewarding to you, the charities you support, and all those in our community who will benefit from your generosity.