No matter how much you shop on Black Friday or Small Business Saturday or Cyber Monday, be sure to save some of your money for Giving Tuesday -- December 3 this year. Giving will soothe your conscience and help needy people and good causes -- even if you no longer itemize your charitable giving on your tax return because of the higher standard deduction.
Surely there is more to philanthropy than a tax deduction. In fact, at www.GivingTuesday.org, you can learn how to connect with nonprofits in your community and around the world. Whether it's a gift of money or your time, you'll find suggestions on how to help others. And that applies not only on Giving Tuesday but every day of the year!
It's worth taking some time to make sure that your money is going to the best, and most efficient, cause. More than 40 percent of individual donations to charities are made during the last few weeks of the year. Philanthropy expert Eileen Heisman, CEO of the National Philanthropic Trust (one of the top 25 grant-making organizations in the United States), points out that most people spend more time researching a new restaurant than they do researching the charities they give to!
--Do your homework before giving
So, if you're going to give, be sure to do your homework. At CharityNavigator.org you can see both star and numerical rankings of thousands of charities, based on their required form 990 that must be filed with the IRS. If a charity devotes too much money to fund-raising or has other warning signals such as excess compensation to the CEO, it will have a lower rating. You can also use this website to search out the best-run charities by cause or category.
--Create your own "foundation"
You don't have to be a billionaire to create your own private "foundation." Just open an account in a donor-advised fund, offered by financial services firms like Fidelity, Schwab and Vanguard. Or search for a community-based donor-advised fund. You make a one-time gift to your donor fund account and then distribute the money to recognized charities in future years. In the meantime, the money in the account grows tax free until it is distributed. If you make a large enough gift to your fund in one year, you can itemize and take a charitable deduction that year.
--Charitable distributions from your IRA
Typically, when you withdraw money from a traditional or rollover IRA, you will be required to pay ordinary income taxes. But you can make a direct gift to a qualified charity with absolutely no tax consequence -- and it will count toward your required minimum distribution for that year. It's called a QCD -- qualified charitable distribution. You must be 70 1/2 or older to use this provision, and the maximum you can give in any one year is $100,000! The funds must come out of your IRA by December 31.
--Gifting appreciated stock
After 10 years of a bull market, you might have some highly appreciated stock. If you sell your shares, you will have to pay a capital gains tax. However, if you gift specific shares to a recognized public charity, you will owe no taxes on the gains and get social credit for a huge gift! The charity benefits because it can sell the stock and use the cash proceeds for its own purposes, also without tax liability.
One reminder: If you are going to itemize your deductions, a receipt from the charity is required if your donation is worth $250 or more. If you are giving goods worth more than $5,000, you'll need a written appraisal.
Of course, you can give any amount of money to anyone on a tax-free basis -- up to $15,000 per year, without any impact on your combined estate and gift tax, which applies after your "estate" is well over $11 million! Whether it's a bit of cash to your grandchildren or a handout to a homeless person or a contribution to a GoFundMe account, your help will surely be appreciated -- even if it doesn't give you a tax deduction. And that's The Savage Truth.
(Terry Savage is a registered investment adviser and the author of four best-selling books, including "The Savage Truth on Money." Terry responds to questions on her blog at TerrySavage.com.)