With the changes in the tax law, many are worried that end-of-year donations are going to decrease. But is there actually cause for concern?
Although tax breaks are a good incentive for donors, they are only one of a myriad of reasons why people give charitable contributions. If your donors have a lasting relationship with your organization, it is highly unlikely that they will stop giving just because they can’t receive a tax break. In those cases, the new tax laws will likely have no impact on a donor’s decision to contribute to your charity.
As you know, most donors, especially those that have history with you, will give as an emotional response. They are giving from the heart. They feel good about their giving, because they want to support a cause that is important to them.
Will organizations lose some donors because of the tax law changes? Yes, but they are donors that you might have lost anyway.
Additionally, many tax advisors are telling donors to bundle their donations:
Rather than make an annual contribution of a modest amount to their favorite charities each year, financial planners are advising clients to make a more substantial gift every three to five years that will cause their itemized deduction amount to rise above the new higher standard deduction level.
Some sources are taking it a step further by suggesting donors direct their bundled gifts specifically to a donor-advised fund (DAF). The theory here is that donors can contribute enough of a lump sum to qualify for itemized deductions, and the DAF can distribute a little bit each year to the appropriate beneficiary.
This does represent an opportunity, albeit a challenge for a charity’s budgeting process, but if you address this concept with your donors it could be a win-win.
Let your donors know you are happy to accept bundled donations, and appropriately adjust your communications to those donors. (For example, don’t send them constant emails or mark them as a lapsed donor in your database if they have made it clear that it was a “three-year” donation.)
The bottom-line is that the impact of the tax laws on giving this holiday season will be minor. So, reach out to your donors and keep building those relationships and openly meet their personal giving decisions and expectations.
May your end-of-year fundraising be successful!