One of the many great things about this time of year is the increased amount of charitable giving and overall kindness that we see from many people. For some, the joy of the holidays may be the reason they decide to give. While others, like to have a good idea of what their total annual income will be or need to wait for year-end bonuses before determining how much they want to give. Generally, about 30% of annual giving occurs in December; with 10% of that annual total occurring on the last three days of the year. What this means for many charitable organizations is spending an entire year planning and appealing/standing out to donors against so many other charitable causes; all while stressfully hoping that the year-end gifting spike is enough to cover their budget and allow them to continue their work for another year.
According to the “Charity Navigator Blog,” for many charities “recurring giving is the best way to support their work, rather than one large, annual gift. It provides them with a steady influx of cash throughout the year so they don’t have to rely as heavily on end-of-year donations.” Additionally, charities can start putting donations to work sooner if they’re gifted earlier in the year which can have a real positive impact. For organizations like Doctors Without Borders, the Red Cross, and many others, that can literally translate to more lives saved.
It can also be better for donors, as spreading out annual gifts into smaller amounts throughout the year can have less of a financial burden. “Nonprofit Source” claims that “donors that set up some sort of recurring monthly donation give 42% more than one-time givers” and they are also much more likely to continue giving in future years. You may even be able to work with the charities to limit the mailings you receive throughout the year once you’ve setup a recurring giving plan, which in turn saves the organization money and reduces waste!
Year-over-year, total charitable giving tends to increase around 2-3% when you adjust for inflation, but that wasn’t the case in 2018 when the totals declined 1.7% after inflation was factored in. As you may recall, the U.S. stock markets experienced a relatively sharp decline in November and December of that year. Although other factors played a part, the increased market volatility at a time when 30% of annual giving normally occurs likely made individuals nervous and led to them writing smaller checks at year-end.
Despite the dip in 2018, online and electronic charitable giving also continues to grow and saw a huge 20% increase in 2020: up from 12.1% annual growth in 2017. Monthly giving accounted for 16% of all online donations in 2017 but was up to roughly 25% for this past year. As is to be expected, the younger generations generally account for the majority of online gifting, but that trend is starting to change. With over 75% of nonprofits across the globe set up to accept online donations or other electronic payments (which will likely continue to increase), more people are getting familiar with setting up electronic recurring gifting plans. Not only is this a more secure method of charitable giving, as compared to mailing in a check, it’s also better for the charities and their causes.
Although it’s likely too late to set up a recurring gifting plan for this year, we did want to remind you about a special tax provision that will allow more Americans to easily deduct up to $600 in donations to qualifying charities on their 2021 federal income tax return, even if they are taking the standard deduction and not itemizing. Under this provision, individuals can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021, and is increased to $600 for married individuals filing joint returns.
Please don’t hesitate to reach out to us with any questions on charitable gifting or recurring contribution plans. You can also call the charitable organizations you support directly to see how they would benefit from a regular gifting plan.