The Fiscal Cliff

With a possibility for a tax deduction limit being imposed for charitable giving, charities are concerned that future giving will decrease.  Earlier this month, 250+ nonprofit leaders spoke with Congress about the importance of protecting the charitable deduction. 

With the unknown of the future of taxes in Washington, some philanthropic individuals are taking advantage of their donation dollars before the uncertainty of 2013 arrives.

One strategy that some donors have utilized is contributing to donor advised funds where they receive a tax deduction now but can wait on distributing funds to causes that mean most to them later.  Furthermore, it is a way to avoid capital gains liability and the growth of assets within a DAF is non-taxable (meaning more funds for charity). 

While no one can see into their crystal ball, it is a gamble as to whether making charitable contributions now or in 2013 will prove to be more beneficial tax-wise for donors. 

As the Heritage Foundation has pointed out, if we go over the fiscal cliff, an increase of $4,100+ in taxes will be seen by the average American.  Additionally, in a poll by the United Way, it was found that 25% of respondents stated their future charitable contributions would reduce by 50% or more. 

As a donor, it is important to have a conversation with your trusted professional advisors regarding your philanthropic goals for both the short and long-term and to strategize on what are the best options to meet these goals. 

While it is generally understood that a fondness for a charities well-being is what internally drives individuals to donate, the tax deduction allows donors additional motivation to give and to give more strategically.  No matter what happens regarding the fiscal cliff, there are some things that non-profits should be focused on. 

Truly ENGAGE your donors. 

Connect with them through various avenues and let them know about opportunities to help your organization besides just monetary donations.  More and more donors want to be actively involved with your mission – make that a possibility for them.

Data: Track & Utilize it. 

A lot of non-profits are good at tracking data but do not utilize it to improve communications, relationships, or offerings for their key stakeholders.  Data can be used both for improving relationships with individuals (if you know that donor Jonathon prefers to be called Jon, why are you addressing letters “Dear Jonathon”?) to a more broad spectrum (why not send out a direct mailing suggesting charitable gift annuities to a list of all donors that are 60+ years old and have donated annually for the past 10+ years?). 

Retain Current Donors. 

We have all heard why keeping a donor is easier than engaging a potential prospect to become an active donor.  They already know about your organization, have a connection, and have made some form of investment.  Keeping current donors happy and engaged will allow your fundraising efforts to grow (while you accumulate new donors as well). 

By: Kristen Schmidt, Marketing Coordinator of CTAC

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