This page is adapted from a blog post that originally ran on the GiveWell blog in 2012. We've updated it to reflect new information and our current understanding of best practices. Published: November 2016
Published: November 2016
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. Doing this will make it very difficult to execute some of the steps below (such as giving appreciated stock or using a donor-advised fund). And if something unexpected happens (as it often does with large credit card donations, which credit-card companies may flag for review), you may have little time to react.
We recommend setting a target date of December 10 or earlier for finalizing your gift if you are giving appreciated stock or using a donor-advised fund.
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.)
The tax-deductibility of our charities in various countries, including the United States, is discussed in detail here. In particular, donors living in the U.S., United Kingdom, Switzerland, Germany, the Netherlands, Canada, and Australia should easily be able to make tax-deductible donations to any of GiveWell's top charities. Donors living outside of these countries, particularly donors who live in the European Union, may also be able to make tax-deductible donations; we recommend checking with the individual charity or charities you're interested in supporting for more information.
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 $1,000, our feeling is that it's worth paying the fees to avoid the hassle for you and the charity of another donation method; fees on a $1,000 donation will generally be around $20-$30. In addition, large credit card transactions are often flagged by credit card companies, although a call to the credit card company can generally resolve the situation quickly.
More information about alternative donation options, such as check donations and wire transfers, is available on our page with advice for larger donors. Additional information about donating via various methods for donors making gifts of all sizes is available here.
4. Give appreciated stock.
In the United States, if you give stock to a charity, generally 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 $1,000 (and has a cost basis of $1,000) but is now worth $2,000, you can generally give the stock to charity, take a deduction for $2,000, and not have to pay capital gains tax on the $1,000 of appreciation. This can result in significant savings. More information is available in 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, due to processing delays, if you're trying to do this.
GiveWell can take direct transfers of stock for the support of our top charities. Please email us at email@example.com if you're interested in this. Another option 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 today, 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 the donor's 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 example, for 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. They may have a minimum contribution amount—for example, Vanguard Charitable generally has a $5,000 contribution minimum.
We also maintain our own donor-advised fund for donors interested in supporting GiveWell's recommended charities.
6. Consider your tax rate.
If you believe that your tax rate is likely to be higher in 2017 than in 2016, you may wish to give at the very beginning of 2017 rather than the very end of 2016. In addition to your marginal tax rate, you may want to consider whether you expect any changes to tax policy that could affect charitable deductions, such as caps on how much you can deduct and, for U.S. taxpayers, the amount of the standard deduction.
As we have in the past, we will count donations made through January 31, 2017 towards our 2016 money moved.
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. These are the best giving opportunities we're aware of for donors interested in accomplishing good with high confidence over the near-term with their gifts.
- 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. 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, please don't hesitate to contact us.