When fundraisers ask for “cash” donations, they’re not only selling their organizations short, but also selling their donors short. A credit card or cheque donation may be easy, but it comes from an account the donor has already paid tax on. The donation actually costs more than the donor is giving.
Illustration comparing the net costs of a cash donation versus a donation from an appreciated asset such as a stock or mutual fund. (CNW Group/Funding Matters Inc.)
To create win-win situations, charities, donors, and advisors should be exploring tax-efficient giving strategies that look beyond what’s in a donor’s wallet.
There’s no question about it: discussing donations can be intimidating. With complex terminology and even more complex calculations, it’s no wonder many fundraisers and donors choose to stay on the path they’re familiar with: cash donations. Unfortunately, this becomes an expensive loss of opportunity for everyone involved.
Discussing tax-efficient giving from stocks, mutual funds, and registered accounts like RRIFs can create significant donations where taxable capital gains come into play. When fundraisers and advisors understand the core capabilities of tax-efficient giving, they provide dramatically increased value to their donors and their organization.
At FUNDING matters® Inc., we developed Giftabulator® with the donor in mind. Our online tool instantly illustrates tax-efficient strategies for donating assets – today or in the future – and it’s now at the fingertips of donors, charities, and advisors.
November 29 is Giving Tuesday, the unofficial kick-off of the “season of giving.” A tax-efficient donation is a win for all involved, lowering taxes for the donor while contributing to a greater good and helping a charity get closer to its funding goals. Bigger gifts become possible and more affordable.
Lowering taxes can be complicated, largely because of national and provincial tax laws. Determining the best way to lower taxes depends on which taxes the donor hopes to lower. Using only the most basic asset information, Giftabulator® presents the donor with scenarios that can lower capital gains taxes, income taxes, and estate capital gains taxes.
Tax-efficient planned giving and major gifts have significant impact on charities. They are the secret weapon of fundraisers and savvy donors alike. When fundraisers ask for cash, they’re asking from the small bucket. The big bucket is filled with the highly taxable assets that have not yet been taxed.
A donor’s most valuable assets, such as real estate or tangible goods, can be inaccessible for the purpose of generating cash for donations. There may be legal or tax consequences associated with the untimely sale of these assets. Empowering charities to engage with their donors on a mutually beneficial path will achieve larger donations and satisfied donors.
Fundraisers, donors, and financial advisors deserve the tools they need to understand the complex benefits associated with making tax-efficient donations to charities.
For more than 20 years, FUNDING matters® Inc. has been a leading North American consultancy and technology company, advising not-for-profit groups, wealth management firms, and government agencies on building sustainable funding models. We also participate in strategic funding opportunities including feasibility/planning studies, strategic communications, and organizational financing.