My dad and I are both Christmas enthusiasts. We love all things holiday – decorating, wrapping gifts, and sentimental movies. I recall being excited for weeks on end about the annual return to television of my favorite Christmas movies like A Charlie Brown Christmas (originally aired in 1965) and Rudolph the Red Nosed Reindeer (originally aired in 1964). Notably, my daughter will never know this type of patience and anticipation since modern technology now allows us to immediately search and watch hundreds of Christmas movies all year long.
One of my very favorite Christmas movies was, and still is, Emmet Otter’s Jug-Band Christmas. Originally aired in 1977, it features a cast of Jim Henson’s lovable Muppet characters. For readers unfamiliar, the story is a twist on another memorable favorite from my childhood: O. Henry’s The Gift of the Magi (originally published in 1905). Emmet Otter and his Ma, a widow, are poor and scrape by on the small amount of money Ma gets from doing laundry and that Emmet receives from doing odd jobs around Frogtown Hollow. As Christmas approaches, both Ma and Emmett long to buy the other a store-bought present: a guitar for Emmett and a piano for Ma. Of course, neither can afford the gift they have chosen for the other.
They both separately learn of, and decide to enter, a music talent contest in the nearby town of Waterville with a grand prize of $50. Unbeknownst to the other, they each sacrifice the other’s livelihood for a better chance at winning the contest. Ma hocks Emmet’s tools for dress fabric to make a dress for the contest. Emmet puts a hole in Ma’s washtub so he can use it as a bass in his jug band. While both Ma and Emmett have great musical submissions to the contest, neither wins. They are, however, overheard by the owner of a local restaurant who ultimately hires them to sing together for his customers. Ma and Emmet learn they are better off working towards a goal together. In the end, the sacrifices they made yield them something better than a contest prize: time together doing work they love.
In this season of giving, generosity and self-sacrifice take place every day. But gift giving, particularly charitable giving, is much more complex than putting a hole in a washtub. Ahead of his time, Andrew Carnegie expressed “[i]t is more difficult to give money away intelligently than to earn it in the first place.” Navigating through a sea of worthy causes is only the first step to informed charitable giving. After identifying a cause, you are passionate about, you should then look to identify which entity or entities are best meeting the needs of the community. To do so you should look for nonprofits that are financially sound and that track and measure the outcomes of their programs.
As a donor you should also analyze how much to give to any one charity or not for profit organization. Part of this analysis is naturally informed by the effect the gift or gifts may have on your income taxes. As a taxpayer you may only deduct charitable contributions if you itemize deductions. The Tax Cuts and Jobs Act signed into law in December of 2017 implemented a higher standard charitable deduction threshold. Specifically, to itemize charitable deductions, an individual would need total itemized deductions to exceed $12,200 (up from $6,350 in 2017) whereas a married couple would need a total of $24,400 (up from $12,700 in 2017). Without itemized deductions, you may lose the tax benefits associated with charitable giving.
To take advantage of higher deduction amounts, many donors consider using Donor Advised Funds (DAFs) to both amplify and simplify charitable giving. DAFs may be opened in a day and allow you to make a charitable donation in 2019 while recommending grants later to the charitable organizations of your choice. DAFs allow you to consolidate all your annual charitable giving such that you receive only one tax receipt while supporting multiple charitable organizations. You can contribute cash, securities, real estate and other appreciated assets to DAFs. Finally, unlike a private foundation which can be costly and time consuming to maintain, a DAF does not have an annual payout requirement. To learn more about DAFs, please contact Community Foundation of North Louisiana: (318) 221-0582.
While taxes may be a small part of making decisions about philanthropy, it is my hope that charitable giving continues to be driven by generosity rather than favorable tax treatment. Giving to a worthy cause that enhances our community should be the ultimate goal. There is nothing more fulfilling than helping to effect positive change!
This article was written by CFNLA CEO Kristi Gustavson and originally published in the Shreveport Times on December 28, 2019.