Kimberly Clouse, Covestor’s Advisory Board Chair joins Covestor Radio to discuss the subject of charitable giving. Covestor Radio is a show about money milestones and investing for your future and brought to you by Covestor, an online marketplace for investing.
Listen to host Eric Dye & guest Kimberly Clouse discuss the following:
1. People often think about giving to charities at year-end, around tax time and at mid-year. What’s the current state of charitable giving in the U.S.?
- For higher income households, the answer is: consumption / lifestyle, the government in the form of taxes, and wealth transfer. Wealth transfer consists of inheritance (giving to family members) and charitable giving.
- Individuals donated some $229 billion in 2012, which was actually up from the $217 billion they donated in 2011. Individuals are the largest source of charitable gifts, at over 70% of total giving.
- Despite the economic situation, 88% of US households are still giving to charity, according to the National Philanthropic Trust.
- There’s generally an uptick in charitable giving during the holiday season – and to a lesser degree, when people are focused on taxes.
- In fact, for the average person nearly a quarter of their annual donations are made between Thanksgiving and New Year’s, according to the Center on Philanthropy.
2. How much do most people give to charity?
- The average annual household contribution is $2,213 while the median is $870.
- As a point of comparison, the average amount that Americans expected to spend on Christmas gifts in 2013, according to a survey conducted in mid-November, was about $704.
- In states like Utah and Mississippi, the typical household gives more than 7 percent of its income to charity, while the average household in Massachusetts and three other New England states gives less than 3 percent. Chronicle of Philanthropy. To account for sharp differences in the cost of living across America, The Chronicle’s study compared generosity rates after residents paid taxes, housing, food, and other necessities.
3. To what causes do most people give?
- Approximately 50 percent of all charitable giving goes to religious, education and arts organizations, according to Charity Navigator. According to Forbes, the United Way and Salvation Army are the biggest US charities.
- Remember, charitable giving takes many forms. Many non-profits welcome volunteering. Last year over 60 million adults volunteered about 15 billion hours of service.
- The top four national volunteer activities are fundraising or selling items to raise money (26.2%), food collection or distribution (23.6%), general labor or transportation (20.3%), and tutoring or teaching (18.2%).
4. What is the best way to fund charitable gifts?
- Most people don’t make charitable donations for tax reasons alone. 62% of high net worth donors cite “giving back to the community” as a chief motivation for giving.
- If you’re going to give, you might as well give in a tax-efficient way, according to financial experts. I am not a tax expert and my advice should not be relied upon…however, I can provide some rules of thumb.
- Taxpayers who itemize deductions on their tax returns can deduct the full amount of cash contributions, up to 50 percent of their adjusted gross income (AGI). Property and capital-gains assets are also deductible, up to 30 percent and 20 percent, respectively, of AGI.
- Individuals who gift financial securities that have appreciated in value can avoid paying the capital-gains tax they would have owed if they had sold them. The gifting of appreciated securities, particularly after good runs in the market like this year, can also serve to bring investment portfolios back into balance.
- For example, if an investor has $25,000 in capital gains on a stock, she can deduct the full amount by giving it to charity…and you can accomplish two thing at one time: Giving to charity and rebalancing an investment account.
5. One final thought on todays topic?
“What you keep for yourself, you lose. What you give away, you keep forever” — Axel Monthe
- The need for charitable giving remains strong and the statistics are sobering worldwide as well as in the US – so it’s good to see a strong tradition of giving in the US.
- In 2012, 46.5 million people (15 percent) in the United States lived in poverty. One in 45 children (1.6 million) experience homelessness in America each year.
About Kimberly Clouse
Kimberly Clouse is Advisory Board Chair at Covestor, a registered investment adviser and an online marketplace for investing.
Passionate about empowering financial consumers, Kimberly works with individuals, families and foundations to help them navigate the increasingly complex world of investment advice and make more informed financial decisions.
She previously served as Managing Director at Athena Capital Advisors and Chief Executive Officer at Hale and Dorr Wealth Advisors. Earlier in her career, she worked for United States Trust Company, J.P. Morgan and Goldman Sachs.
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