If you’re planning on giving to charity this holiday season, there are a few simple steps you can take that can save a lot of money – allowing you to give more at the same cost to yourself – as well as reduce hassle.
1. Don’t wait until the last minute. Many donors wait until the very end of the calendar year to give. (Over 20% of our 2011 money moved, excluding gifts of $100,000 and more, came through in the last three days of the year alone.) Doing this will make it very difficult to execute some of the steps below (such as giving appreciated stock). And if something unexpected happens (as it often does with large credit card donations), you may have little time to react.
We recommend setting a target date of December 24 or earlier for finalizing your gift (for a week’s cushion).
2. Try to get a tax benefit. Details vary by country and personal situation, but a tax deduction can allow you to give much more to charity at the same cost to yourself. (That said, as discussed below, we believe it is more important to give to the most effective possible charity than to get the maximum tax benefit.)
Our #1 charity, Against Malaria Foundation, offers tax deductibility to citizens of the U.S., the U.K., and Canada. Our current #2 charity is a U.K. charity only, but U.S. donors can get a tax deduction for giving to GiveWell for the support of SCI.
If you’re in another country, you may wish to look into groups in your country that provide the service of (a) taking deductible donations themselves; (b) transferring the funds (minus fees) to charities abroad. While they can charge substantial fees, you may still come out ahead after tax considerations.
3. Avoid the large transaction fees and delays associated with large online donations. When donating via credit card, you will almost always be charged standard credit card processing fees. For donations under $5000, our feeling is that it’s worth paying the fees to avoid the hassle (both for you and the charity) of another donation method. But fees on a $5000 donation will generally exceed $100. In addition, credit card transactions of $5000 and up are often flagged by credit card companies (though a call to the credit card company can generally resolve the situation quickly).
This year, Google Checkout stopped offering fee-free processing, and we were unable to find a viable alternative with lower fees. Therefore, we are recommending that people giving $5000 and up consider writing a check or making a bank transfer. (Details)
4. Give appreciated stock. In the U.S., if you give stock to a charity, neither you nor the charity will have to pay taxes on capital gains (as you would if you sold the stock yourself). If you have stock that you acquired for $1000 (and has a cost basis of $1000) but is now worth $2000, you can give the stock to charity, take a deduction for $2000, and not have to pay capital gains tax on the $1000 of appreciation. This can result in significant savings. (More at Vanguard’s write-up on this topic.)
Taking advantage of this requires having some of your net worth invested in appreciated stock (or other securities), knowing (or being able to obtain) the cost basis of such securities, and arranging to transfer the stock directly to a charity, which is generally a fairly easy process, but varies from broker to broker; waiting until December 31 can be especially problematic if you’re trying to do this.
GiveWell can take direct transfers of stock for the support of our top charities, so let us know if you’re interested in this. A more robust way to smooth the process of giving appreciated securities is to take advantage of a donor advised fund, discussed immediately below.
5. Look into donor-advised funds to make the process smoother and more consistent year-to-year. Donor advised funds allow donors to make a charitable donation (and get a tax deduction) now, while deciding which charity they’d like to support later. The donation goes into a fund that is “advised” by the donor, and the donor may later recommend a grant from the fund to the charity of his/her choice.
We see a couple of advantages to this setup. One advantage is that you can separate your “decision date” (the date on which you decide which charity you’d like to support) from your “transaction date.” That means that if you aren’t ready to decide which charity to support yet, you can still get started on the process of transferring funds and getting a tax deduction for the appropriate year. Another advantage is that if you change the charity you support from year to year, you’re still working with the same partner when it comes to transactions, so the process for e.g. donating stock will not change from year to year. Donor advised funds are often set up to easily accept donated stock, whereas charities may or may not be.
Many large investment companies – Vanguard, Fidelity, Schwab – offer donor advised funds. They generally charge relatively modest management fees.
We do not recommend delaying this year’s donation while you look into donor advised funds. Donor advised funds can make giving more convenient over the long term, year-to-year, but you can get all the advantages of efficient giving this year without one. We also maintain our own donor-advised fund for donors interested in supporting our recommended charities.
6. Consider the political environment. If you believe that your tax rate is likely to be higher in 2013 than in 2012, you may wish to give at the very beginning of 2013 rather than the very end of 2012.
We’ll likely be counting donations made in the first week or so of 2013 toward our 2012 money moved (we’ve made similar adjustments in the past).
7. Choose your charity wisely. Saving money on taxes and transaction fees can be significant, approaching or exceeding a 50% increase in the amount you’re able to give. However, we believe that your choice of charity is a much larger factor in how much good your giving accomplishes.
Our charity recommendations make it possible to support outstanding, thoroughly vetted organizations – which we’ve investigated by reviewing academic evidence, interviewing staff, analyzing internal documents, conducting site visits, assessing funding needs, and more – without needing to do your own research. We publicly publish the full details of our process and analysis, so you can spot-check whatever part of our work and reasoning you’d like to.
- If you support our recommended charities (on the basis of our recommendation) but you don’t give through our website, please use the donation report form to let us know about your gift; doing so helps GiveWell track our impact.
- We believe that even when dealing with a relatively complicated gift (for example, a gift of stock), it’s possible to give quite quickly and with only minor hassle. The much more difficult challenge is choosing a charity, and we’ve tried to make that easy as well. So we hope you’ll give this season, even if you’re just starting to think about it now; if you’d like more advice or help, don’t hesitate to contact us.