Charitable Giving: It’s Not Just About the Tax Savings.

thanksgiving-imageIt’s Thanksgiving, one of the times during the year when we focus most on gratitude.  I’m grateful for my family, my business, my partners and team, my home, my community, and yes, my dentist!  Thanksgiving is also a great time of year to begin thinking about your tax deductible charitable gifts for the year.  Thinking about that inspired me to post this article on charitable giving (slightly adapted) that I wrote for the SDDS Nugget Magazine a couple years ago.

In December 2013 I attended the SDDS Holiday Party.  I got a little tipsy and spent a little bit too much at the silent auction.  I wasn’t too tipsy, however, to really sit up and take notice when they announced that the family of Dr. Jim Oates had donated $215,000 to the Sacramento District Dental Foundation.  A donation that size really says a lot about Dr. Oates and his family.  It shows how much they care about dentistry and about the community.  It also shows the high value they place on charitable giving.

Yes, I’m a CPA, and yes, there are tax and estate planning benefits for giving to charity, but really, those should be considered as secondary benefits to the primary benefits of giving, which I believe are emotional and spiritual.

Many people believe in the philosophy you have probably heard referred to as “karma”, or “what comes around goes around.”  If you have ever given someone a birthday present, or served a meal to the poor, or provided a dental exam or cleaning to someone who couldn’t afford it, I’m sure you have felt in your heart the power of giving.  In her diary, Anne Frank wrote, “No one has ever become poor by giving.”  I think this was an understatement because not only do we not become poor by giving, we become rich: rich in spirit, rich in emotion, rich in connection to those outside of ourselves.

If charitable giving is in your heart, it’s important to build it in to your entire financial plan.  I know this is what the Oates family did because they gave the donation to the Dental Foundation via a charitable trust.  This is a tool used for estate planning designed to give either a steady stream of income or a large chunk of money to a charity while avoiding or minimizing estate taxes.

There are also income tax benefits for giving to qualified charities.  Though there are some exceptions, generally you can give up to 50% of your adjusted gross income every year to charity.  And if you give too much, you can carry forward the non-deductible contributions for use in future years.  You can donate, money, goods, vehicles, land, and appreciated property such as corporate stock and receive a tax deduction for your donation.  If you receive a windfall and want to make a large donation, you may want to consider using a “donor advised fund”.  This tool allows you to take the tax deduction for the large donation in the current year, but direct the giving over a number of years or to a number of charities.  You can also donate your time, but the reward you receive for that will not show up on your tax return, it will show up in your heart.

Another Anne Frank quote seems to apply perfectly here too: “How wonderful it is that nobody need wait a single minute before starting to improve the world.”  I should also mention that nobody need wait a single minute before consulting his or her CPA, as the rules around charitable giving, and all the other tax rules for that matter, can be complex.  Seriously though, follow your heart, build charitable giving into your financial plan, and make the world a better place.

Ben Anders, CPA