Strategically Share Top Year-End Giving Options Nonprofit Donors May Not Be Aware Of

Your job as a philanthropy facilitator is to do everything in your power to make giving to you as easy, joyful and rewarding as possible. You are, if you will, a donor Sherpa. As a donor guide, you likely know things your donors don’t know. You have tools they don’t have. Your role along the pathway to passionate philanthropy is to use every tool in your toolbox to bring your donor joy and meaning. And, also, to optimize your chances to secure a donor’s most generous gift.

Right now, part of your job as a philanthropy facilitator means alerting your donors to special year-end giving opportunities.

It’s the bare minimum to tack “this gift is tax deductible to the extent provided by law” onto the end of your appeal or bottom of your donation landing page.  It’s perceived as relatively meaningless ‘fine print’ that is mildly reassuring, but certainly not persuasive.

Why?

Because most readers won’t really understand what it means.

If you want to persuade, you’ve got to offer up useful, timely information.

There is no timelier period than NOW, when folks are thinking about year-end philanthropy.

If you act quickly, you may persuade some of your supporters to give more than they were previously considering giving. And, because you helped them, they will get a ‘warm glow’ shot of dopamine that will make them feel warm and fuzzy towards you!

Ready to offer some astute year-end giving advice?

Don’t Lead with “Get Your Year-End Tax Deduction”

This strategy is pretty much a dinosaur. You may recall the Tax Reform Act of 2017 significantly reduced the incentive to itemize by roughly doubling the standard deduction and making this option more attractive for more taxpayers. Thus, many donors lost the incentive to give based on saving on taxes alone (luckily, this isn’t the primary reason most people give).The 2020 CARES Act instituted a $300 above-the-line deduction for non-itemizers for 2020 and 2021, but that has gone away too. Also, the deduction for cash contributions to public charities is no longer up to 100% of adjusted gross income (AGI) for those who itemize. Them’s the facts.

Folks can no longer deduct charitable gifts unless they itemize, and they can only do so up to 60% of AGI. But… there are other ways you can (1) help donors get the most bang for their charitable buck, and (2) encourage a larger gift than that donor may have otherwise considered.

4 Ways to Give of Which Donors May Not Be Aware:

Each of these giving vehicles has tax and other advantages for the donor. Plus, they enable supporters to make larger gifts than they might have imagined because they come from assets other than income.

1. Appreciated assets donation
2. Appreciated assets “swap” (aka gift and replacement purchase)
3. IRA “rollovers” (aka qualified charitable distributions)
4. Donor advised funds (and “bunching” strategy)

1.  Let Donors Know You Accept Appreciated Assets 

For donors who own such assets, giving them is a smart way to accomplish their philanthropic objectives. It enables them to avoid the capital gains taxes they would otherwise have to pay, and the full value of their gift goes to further your good work. Why not let people know you accept donations of appreciated non-cash assets, such as stock, mutual funds, and/or real estate?   Include this information on your website where it’s easy for donors to find.

You might even go the extra mile by explaining how this may work to their advantage.

2. Suggest a Gift Swap of Appreciated Portfolio Assets and Replacement with New Shares

I love to share this strategy with donors who tell me they love all their stocks so much they can’t think of any they’re ready to give away.  No problem!  Suggest they consider gifting their current stocks and replacing these beloved investments in their portfolio with a purchase of new shares in the same company — with the cash they would have otherwise donated. Why is this smart?

1. They avoid paying capital gains on the appreciation.
2. They get the same income tax deduction as a cash gift.
3. Their stock gets a new cost basis, and any future appreciation gain will be minimized.

Relatively few nonprofits actively encourage donors to give astutely in this manner.  Wouldn’t you like to stand out by being the “good guy?”

3. Suggest the Advantages of a Charitable IRA “Rollover” Gift

Starting at age 73 (used to be 70 1/2) the IRS mandates IRA owners to take taxable annual income withdrawals, known as Required Minimum Distributions (RMDs). If they don’t take the RMD, they can be subject to up to a 50% excise tax on this amount. For donors who don’t need the income, and really don’t want it because it will lift them to a higher tax bracket, what’s known as a ‘Qualified Charitable Distribution (QCD)’ is a useful strategy. Rather than face (1) a big tax bill (RMDs are taxable when received), (2) a potential surtax on net investment income, and (3) increases in Social Security premiums for Medicare Part B and Part D, IRA owners age 70 ½ or older may charitably gift $105,000 in 2024 from an IRA tax-free.  Couples can each transfer this amount, for a total of $210,000. The gift must be transferred directly from the IRA to the charity; the money cannot first be paid to the donor (hence the “rollover” nickname).

It’s a wise move to promote these gifts as they offer a way for donors who don’t itemize to add to the standard deduction by giving away pre-tax assets completely tax-free. And it’s also a way for folks to reduce the balance in their IRAs, thereby lowering the amount of future RMDs. This is an often-overlooked opportunity. If you have donors interested in reducing the size of their IRA, it’s important to remind them of this rollover distribution opportunity.  Gifting IRA assets now can provide a future estate tax savings for donors with taxable estates (over $13.61 million per individual in 2024).

Note that even younger donors may prefer to give from their IRA than other invested assets during their lifetimes. Since income earned in IRAs is pre-tax, any amount left after a donor’s death is subject to a double tax – income (known as “income in respect of a decedent”) and estate.  For this reason, it’s a terrific asset to give to charity, leaving heirs with non-IRA assets that will not be burdened with income taxes. Be a good guy and let your donors know!

4. Suggest Giving from a Donor Advised Fund (DAF)

Some of your donors may have money parked in their philanthropic piggy bank (aka DAF), and they’ve simply forgotten it’s there.  This could be especially true since the Tax Reform Act of 2017 created higher standard deductions, making them a more attractive alternative than itemizing for many people. This meant the charitable deduction was no longer a giving incentive. Some folks figured out a “bunching” strategy where they doubled up on gifts to a DAF one year, taking the charitable deduction; they made no gifts the following year and took the standard deduction. This has become a favored strategy for giving to donor advised funds.

Consider including language like this in your year-end communications: “Do you have a Donor Advised Fund or private foundation? If you have undistributed funds waiting to be put to work, please reach out to your DAF or foundation administrator now to recommend a grant to [your charity] or to the charities of your choice. You will be making a real difference in the lives of those who could use a helping hand (or whatever reason makes sense for your charity).”  

If you have donors who’ve given via a DAF in the past, but have not done so yet this calendar year, reach out to them individually. The most efficient way is to make a phone call, followed by an email or text (if this is something they’ve opted into). Do this NOW; don’t wait for the last two weeks of the year when many folks are travelling or otherwise busy with holidays. Try: “Last year you generously made a gift through your Donor Advised Fund – thank you! We’ve not yet seen a gift from you this year, and are hoping we’re still on your grant list. If you’ve made a recommendation, and we should be on the lookout for it, please let us know so we can thank you properly. If you have not, and I can answer any questions to help you with your decision, please let me know. Even if the answer is “no” this year, it would help us to know your reasons. In fact, that would be a gift to us too! As always, your support means a lot.”

Sometimes a donor wishes to make a significant gift via a transfer of appreciated real or personal property. If you’re not set up to accept such a gift, this can be an opportunity to suggest they give it to an already-established DAF repository such Fidelity Charitable,  Charles Schwab Charitable, Vanguard Charitable and National Philanthropic Trust. They may not be aware they can do this, so you’re doing them a “philanthropy facilitation” favor while also laying the groundwork for them to recommend a gift to your organization.

How to Make Donors Aware

As with all nonprofit marketing, it’s best to take a multi-channel approach. Some of these things you still have time to do between the end of the calendar year and now. Others can be put into your plan for next year. No matter which strategy you use, always include specific contact information so would-be donors can connect with a real person. Make sure someone is monitoring this individual’s inbox and voicemail during the end of the year. You don’t want to lose a gift because someone happens to be out sick or on vacation! If donors have questions, you don’t want them stopped dead in their tracks pondering how to get answers. Make it super easy for them to get in touch with you via phone, email and website FAQs.

1. Suggest tax-beneficial giving alternatives when speaking with major donor prospects. Once the gift is closed, ask how they’d like to make their gift. Cash? Appreciated securities? IRA rollover? DAF?  Let them know your understanding of the benefits of these various disbursement strategies; then suggest they consult with their own advisors.
2. Publicize astute year-end giving strategies on your website donation landing page. Include information about gifts of appreciated assets, QCDs, and donor advised funds. And make it as easy as possible for donors to follow through.
3. Include information about year-end giving in your out-of-office email and voicemail.
4. Send campaign email directing donors to your website pages highlighting these strategies.
5. Ask folks if they’d like information about tax-beneficial giving strategies in your written appeal remit pieces.
6. Feature stories about donors who have made QCDs, appreciated asset gifts and donor advised fund gifts in your online and offline newsletter.
7. Include articles about these giving strategies in your annual report or other publications.
8. Send a brochure (can be an online version) outlining the advantages of giving through these non-cash vehicles.

Always include a disclaimer. Remind folks in your communications your nonprofit does not offer professional legal or financial advice and it is always recommended they consult with their personal advisors. Make it clear you are offering suggestions for informational purposes only, and they may wish to discuss this with their own professionals to determine if they are applicable to their own situation. And to assure they are receiving the most accurate, up-to-date information.

Want More Year-End Giving Tips?

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And if you can’t do everything you wish you could this year, get ahead of the game and put it on your list for next year.

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