Tax Day is right around the corner, meaning many of your donors are thinking about ways to reduce next year’s tax bill. While the traditional year-end “giving season” tends to steal the spotlight, your donors may be waiting to give in November and December out of habit rather than intention.
This presents the perfect opportunity to encourage donors to take action earlier in the year. Help them understand the advantages of planning and making a gift now.
1. Maximizing Tax Benefits
Planning and/or executing a gift early in the year allows donors to thoughtfully construct a strong giving strategy that can effectively reduce their tax burden while also supporting your important work. By starting early, donors can:
• Avoid missed deadlines. Completing a gift well ahead of time eliminates the risk of missing the December 31 deadline to receive an income tax deduction.
• Strategically itemize deductions. Bunching gifts from two or more years into a single tax year allows donors to maximize their itemized deductions, often providing greater tax savings than taking the standard deduction.
• Reduce income taxes. Making a large donation to a donor-advised fund (DAF) now can help offset expected taxable income this year while still giving donors the flexibility to distribute grants from the DAF over time.
• Optimize appreciated securities. Making a donation of appreciated securities at a time that works best for their portfolio and favorable market conditions can increase both tax benefits and the overall impact of their gift.
2. Avoiding a Rush on Complex Gifts
Donors interested in giving land, works of art, a business interest, or even more unusual types of digital assets should leave plenty of time for strategic gift planning and execution. By initiating a conversation with your team earlier in the year, donors can determine whether your organization will accept their specific asset, and if so, work with you on how to tailor their gift for maximum impact. And, if they are required to obtain a qualified appraisal, there will be ample time to accurately determine the value of the gift for charitable income tax deduction purposes.
3. Ensuring All Options Are Available
Savvy donors may seek out powerful giving tools—such as charitable trusts or gift annuities—that often take more time to establish and fund than anticipated. Donors who wait too long will find that some of these options are no longer available because there simply isn’t enough time to properly set them up and qualify for the income tax deduction this year. Or they may cause themselves unnecessary stress trying to rush to complete their gift by the end of the year. For many donors, the planning advantages of these tools are worth the extra time it takes to create them—assuming they plan ahead.
4. Helping Provide Financial Stability for Your Organization
Of course, don’t forget to mention that when donors plan ahead, it helps your organization, too. A surge of donations at the end of the year is great but can strain administrative resources. A more predictable revenue stream allows for better budgeting and planning and helps ensure that your operations can continue running smoothly throughout the year.
How to Encourage Early Planned Giving
Initiating early planned giving conversations can not only result in more effective gifts for donors but can increase their connection to your work and their sense of involvement and impact. Whether in personal discussions, mailings or emails, or on your website, consider the following ideas:
• Highlight the benefits. Emphasize that early planning provides greater flexibility and can help donors maximize tax advantages.
• Clearly communicate deadlines. Go beyond the typical December 31 deadline by clearly highlighting the date donors should initiate various gift options to ensure timely completion and avoid end-of-year stress.
• Create and share compelling case studies. Provide examples that illustrate better gift outcomes as a result of not being rushed during the busy year-end season.
• Engage professional advisors. Encourage advisors to discuss charitable planning with their clients earlier in the year.
• Invite early conversations. Urge supporters to have early or mid-year conversations with members of your planned giving team to explore gift options tailored to their unique circumstances, leaving plenty of time to implement the gift if they decide on an effective strategy.
