Q. What is direct giving?
A. Direct giving is the simplest way to make a gift. You can write a check, use your credit card, or instruct your broker to transfer securities to an organization. You can ask your accountant or bookkeeper to track your donations or track them yourself using a money management tool like Quicken or a spreadsheet.
Direct giving is also the most flexible giving structure. You can make gifts to charitable organizations as well as to organizations that do not qualify for tax deductions, such as political campaigns or for-profit businesses with social missions. You have complete control over funding decisions.
Q. What tax deductions am I eligible for when I give directly?
A. If you give to 501(c)(3) charitable organizations, your contributions are generally tax deductible provided that you itemize deductions—i.e., do not claim the standard deduction. Cash gifts to public charities—i.e., 501(c)(3) organizations that are not private foundations—can be deducted up to 50% of your adjusted gross income (AGI); this limit can include gifts of capital gain property up to 30% of AGI, with the rest in cash. For instance, a taxpayer with AGI of $100,000 could deduct $30,000 of non-cash gifts to public charities plus an additional $20,000 of cash gifts to public charities. For tax years 2018 to 2025, a temporary rule allows taxpayers to deduct gifts to public charities up to 60% of AGI but only if all those gifts are in cash. A taxpayer whose contributions exceed the applicable AGI limit can “carry over” the excess deductions for up to five years.
For gifts of capital gain property to public charities, taxpayers generally can deduct the fair market value of the property if the property has been held for more than one year. Capital gain property includes shares of stock, most other financial assets, and most real estate. The rules can be complicated, so consult your tax advisor about anything other than straight cash gifts.
Donations to 501(c)(4) social welfare organizations and other political organizations are not eligible for individual income tax deductions, even though these organizations may be tax-exempt themselves. Gifts to for-profit businesses are also not tax-deductible even if the businesses have social missions.
Q. Can my gifts be made anonymously?
A. Yes. Your personal tax return is not publicly available. Although public charities must report certain gifts, the names of the donors are redacted when the tax reports are made public.
Q.When might I consider vehicles beyond direct giving?
A. Direct giving is straightforward and easy, but if your giving becomes complex―say, because you wish to develop and implement your own giving strategies―then you should consider other giving structures. For example, if you want to hire staff to support your philanthropy, or to institutionalize your philanthropic legacy, you may consider establishing a foundation (see below).