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Charitable IRA Rollover Presents Opportunity in New Tax Legislation

Here we are already, the end of the year push. It seems like just yesterday the new tax legislation was passed and hardly a day went by without some prediction of the impact on the nonprofit sector.

Once we move into 2019 and are able to look back and start dissecting giving data from 2018, we should gain a clearer picture of how donors are reacting to the tax changes. Are taxes really a motivator for giving, and if so, for which groups? Will certain sectors be more affected than others? Will philanthropic giving track with the growth of the economy?

Unfortunately, we won’t have those answers until we can look at the whole of giving in 2018, including the final months, when most donors typically make their gifts. So what can you do to encourage giving by donors who have the potential to make major gifts but are unsure how it will affect their tax situation?

One relatively simple idea, for donors over 70 ½, is the charitable IRA rollover, in which donors can direct all or part of their required IRA distribution directly to a charity. One of the main benefits of this type of gift is that donors don’t even have to worry if they will itemize or not. They simply don’t pay the tax they normally would on the distribution.

Start by segmenting out all your donors over 70 1/2, and see if there are some loyal donors who may be good candidates for this type of gift. With a small enough number of prospects, a simple phone call or visit might suffice. If you have a large number of prospects in this age range, you may even consider planning a targeted direct-mail piece as part of your annual fundraising plan.

Shocking Statistic: According to a Charity Navigator survey, nonprofits receive, on average, 41 percent of their contributions from Thanksgiving to New Year’s.