What To Consider When Giving Back

Caitlin Gassert, Nonprofit Marketing Director, Business Banking, First Republic Bank
November 20, 2018

In 2017, Americans donated a record $410 billion to charity, and giving by individuals represented 70 percent of total contributions, according to Giving USA. This holiday season, or year-end, is an opportune time to reflect on your personal values, consider what impact you would like to have and plan for what you hope to change in the future.

With more than 1 million public charities registered in the U.S. as of 2016, according to the National Center for Charitable Statistics, determining what cause, which organization and how to support can seem like a daunting process. Ultimately, finding the right fit is a matter of personal preference and goals. Here are three considerations to help guide your giving choices.

1. Identify causes that align with your values

If you are uncertain of where to begin, start by asking yourself these questions:

  • Which issues matter most to me? Why?
  • What would I like to see change in my community, country or the world?
  • What results do I expect to see from my philanthropy? Are there tangible outcomes I am interested in seeing?
  • Who else will be involved? Is it important for my family to participate in some way?
  • What level of involvement am I looking for? Do I have the time and desire to fundraise, volunteer or lend my skills and expertise?
  • What, if any, are my expectations around recognition for my gift?

For inspiration, the types of nonprofit causes to consider, according to Charity Navigator, include human services, education, community development, international, religion, health, environment, animals, human and civil rights, research and public policy, and arts, culture and humanities.

2. Identify effective organizations

Once you’ve decided on a cause to support, the best way to evaluate the effectiveness of a nonprofit is to take a closer look at the organization’s programs, operations and people.

Programs

First and foremost, make sure the mission and program model of an organization are clearly aligned with the cause you’re most interested in. You can determine how effective any given program is through its measurable impact. Whether you are donating to a local food bank, national institution or international aid organization, strong programs will be able to clearly demonstrate how your donation will be put to work.

To assess the strength of an organization’s programs, spend some time on its website and review the annual report. Look for transparency around goals, progress and how success is measured.

Operations

It’s critical for a nonprofit to operate foremost with efficiency and sustainability. The simplest question to ask is: For every dollar you donate, what percentage directly reaches those benefitting from the mission?

The best way to determine this is by looking at a nonprofit’s profile on Charity Navigator, which has rated more than 9,000 organizations, and GuideStar, which provides financial information directly from IRS sources. GiveWell is another resource that identifies and recommends a limited number of charities that its methodology deems most effective in terms of lives saved or improved. These reputable external agencies can give more insight into how efficient an organization has been with its funds compared to other nonprofits in the same field.

One caveat is that ratings aren’t everything; a nonprofit may be growing or may be investing in the future, which may not be reflected in its “score” by external agencies. To get the full picture, read the organization’s annual report or directly connect with the nonprofit’s development team.

People

An organization’s success largely depends on the people behind the mission, from board members to senior leadership to the staff on the ground doing day-to-day work. You can get an initial understanding of the key leaders from an organization’s website. It’s worth noting who is involved, what level of experience or outside expertise they bring to the organization, and how long they’ve been at the organization.

If you’re planning on making a sizable gift, it may be worthwhile to speak or meet with someone from the organization for several reasons. Firstly, it’s a good litmus test for how well the organization interfaces with donors and, if you’re looking for a longer-term commitment, it will be beneficial to have those connections up front. Furthermore, this will also allow you to have a dialogue about programmatic goals that you may wish to learn more about or help fund in the future.

3. Decide how you want to give, and make a plan

To get the most out of your personal philanthropy, it’s important to decide what you’d like to accomplish and have a plan to get there. Most people think of cash or stock donations when it comes to giving back. However, it’s equally important to consider other ways that you can support the causes you care most about. Finding the intersection between your philanthropic goals and your personal capacity is crucial to a fulfilling experience.

Set a giving goal

During the 2016 tax year, the average charitable deduction among American taxpayers was $5,508, according to IRS data as reported by The Motley Fool. While there are many schools of thought on how much you should give, ultimately you need to decide what makes the most sense for your budget and financial goals.

Once you know how much you plan to give, map out how you will reach that goal. Many people opt to give one end-of-year gift. Another option is to become a monthly donor, which is a convenient way to give back year-round that may better suit your budget and help you achieve greater cumulative impact.

Be mindful of tax implications

If one of your objectives is to receive a tax deduction through charitable giving, speak to your accountant and understand which threshold you need to meet. First Republic’s 2018 year-end tax checklist can help you organize the different aspects of your finances and see where charitable giving fits in.

Given some of the new limitations of the Tax Cuts and Jobs Act of 2017 (TCJA), some taxpayers may find that “bunching” their deductions results in more efficient income tax planning. By bunching, the taxpayer is carefully timing discretionary medical and/or charitable contributions to be incurred in a year where these deductions will serve them better from an overall income tax perspective.

Consider how you give

Another aspect to consider when planning is restricted versus unrestricted donations. Unrestricted donations are funds the nonprofit may use for any purpose, offering the most flexibility to the organization. Donors, however, have the option of designating or “restricting” the use of their donations for a singular purpose. If you feel strongly about a specific program or a geographical service area, make it clear that your donation is restricted to guarantee that your dollars will be dedicated accordingly.

It’s also worth noting that how you give can matter. Check with the organization before sending a large donation; for example, you may avoid an online processing fee of 2% (which can make a big difference for a large gift) by sending a check instead.

Beyond financial support

Remember that you can donate your time, lend your expertise and tap into your network to support a cause.

Many organizations rely on volunteers to support their programs. Volunteering with friends, coworkers and family members can be a highly rewarding experience that allows you to see firsthand how you are making a difference. While it’s popular to volunteer around the holidays, consider spreading your service out throughout the year when organizations may have a harder time filling volunteer activities.

If you’re looking for a higher level of engagement, find out if the nonprofit you’re interested in is in need of new board or junior board members. You may be surprised how much you have to offer that would help advance the mission of a nonprofit. Explore which opportunities exist at the organizations you are interested in and the commitment that is the best fit for you.

Finding the right cause, organization and method of giving back is not always as simple as it seems; however, with some reflection and research, you can contribute in a way that is personally meaningful and has a significant impact on the issues that matter most to you.  

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document. First Republic does not provide tax or legal advice. We make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained here. This information is governed by our Terms and Conditions of Use.