4 tips to jump start your charitable giving
After she finishes her next round of giving, Mackenzie Scott will have donated nearly $11 billion of her fortune to “people working to build power from within communities” as the agents of change whose “service supports and empowers people who go on to support and empower others” according to her recent blog post for Medium.com.
And she won’t be done giving with that, since she’s signed the Giving Pledge as a promise to give away the majority of her fortune along with Warren Buffet, Bill Gates, Melinda Gates, and many others.
Charitable giving can take many forms and can start at any level, from donating $50 to a local women’s shelter or children’s charity to creating a scholarship fund or private foundation with millions of dollars (or billions). But if you’ve never done more than donate small amounts here and there, you may not understand how you can reach a level of giving that creates a significant impact like Ms. Scott is doing now. And you don’t have to help found the next $1.5 Trillion dollar company to do it.
There are also significant tax benefits tied to charitable giving if done correctly, making it a win-win situation!
1. For tax purposes, make sure you are donating to 501(c)(3) organizations. These are the only organizations that the IRS will recognize for tax deductions when you go to complete your return. You can read all about the IRS rules on their website.
2. When you’re a solo entrepreneur, sole proprietor, partner in a partnership, or S-corporation, your charitable contributions flow through directly to you just like your business income. It’s important to talk with your tax professional and financial advisor before making contributions, because you’ll only be able to deduct contributions if you itemize. That means if you’re single and under age 65, you’ll have to have more than $12,550 of deductions in 2021 (known as the Standard Deduction) before you can deduct charitable contributions. If you’re married and file a joint tax return, the threshold is $25,100. Note: The IRS can and has made changes to how charitable contributions can be deducted at different times, like during the height of the coronavirus pandemic in 2020, so make sure to check for any modified rules making it easier to deduct contributions.
3. Be intentional with your giving. Rather than giving small amounts to a lot of different charities throughout the year, consider choosing a small number of causes that matter the most to you and donating larger sums to just a few charities. Many organizations also need funding mid-year, because so many contributions are made just before December 31st every year. So, identify the causes you care most about, and consider making larger contributions sometime in the middle of the year for the most impact. Making fewer, larger contributions also makes it easier for reconciliation purposes at tax time.
4. Grow your business and grow your personal wealth. The more money you make and the more wealth you build, the more you can give back to your community and to other causes that you care about. As you grow your wealth, you’ll have more options for charitable giving as well: from donating highly appreciated stock, property, or equipment rather than cash, to utilizing Donor Advised Funds, or charitable trusts, or creating a private foundation.
Many women become entrepreneurs in the first place because they experienced a hardship or inequality that gave them the desire to make big changes for themselves and for the world, so it’s not surprising that they also tend to give back to their communities and to causes they care about at a higher rate than men! When women begin to focus on growing their personal wealth in a systematic way, we’ll be able to utilize that wealth to affect change just like Mackenzie Scott is doing right now.
The contents in this article are being provided for educational and informational purposes only. The information and comments are not the views or opinions of Union Bank, its subsidiaries or affiliates.
Get in touch with The Private Bank
Build a financial partnership to last a lifetime.