So many things make the holiday season special—colorful lights, holiday cookies, and exchanging gifts with friends and family, just to name a few. However, there is nothing like helping someone in need to truly fill your heart with the holiday spirit. Charitable donations are a great and meaningful way to contribute to your community and embrace this season of giving. But did you know that charitable giving can also provide financial benefits?
This guide will show you step by step how you can follow your heart—and use your head—to give a gift that truly gives back. Read on to learn specific steps on how to properly budget for charitable giving, understand the tax advantages, and make the most out of what you have to offer. We’ve also provided a synopsis of a few of our favorite local non-profit partners who are improving the lives of people right here in Vermont, so you can skip the research and get right to the giving. Get started on these step-by-step tips today and spread the holiday cheer to those most in need…and your tax return.
Budgeting for Charitable Giving During the Holiday Season
The holiday season comes with a lot of costs. By preparing a simple holiday budget, you can freely engage in the holiday cheer and give to those in need without stress. Here is how to properly budget so you can support causes close to your heart.
Set aside a portion of your holiday budget for charitable donations
What can you feasibly spend this holiday season? Determine your holiday budget by including costs to buy gifts, travel, and holiday entertainment. Then, allocate a percentage of this budget specifically for charitable donations. For example, perhaps you can set aside $1,000 for total holiday spending. If you allocated 10%, you could give $100 to charitable causes.
Evaluate your finances
Once you have determined your holiday budget, it is important to assure that the amount you have allocated is a reasonable target. Assess your current financial health by reviewing your income, expenses, and savings. If you are unsure, review your bank statements to get an average of your monthly spending and income. Consider any end-of-year bonuses or additional income that could increase your giving capacity.
While charitable contributions are a great way to engage in the holiday spirit, they should never compromise your essential expenses (e.g., rent, utilities, groceries) and savings goals. On the other hand, extra funds beyond your financial goals can help someone else meet basic needs. Verify or adjust your holiday budget established in the first step based on this financial review. Remember, giving to charity should be a positive experience, not cause undue stress.
Choose Causes Close to Your Heart
Now that you have determined what you can give to charity this season, take some time to choose a cause that is important to you. Reflect on the issues and causes that speak to your value system, such as education, health, the environment, animal welfare, or supporting humanitarian efforts. Research organizations that support these causes to ensure they are reputable and effective, and that your money will go directly to where it is most needed. The Charity Navigator and GuideStar are great resources for searching charities by cause and to verify the legitimacy and impact of charities.
Consider Non-Monetary Contributions
Money is not the only way to give to those in need this holiday season. You can also volunteer your time, offer pro bono work, or donate useful items you no longer need. Volunteering with local charities, nonprofits, or community organizations is a great opportunity to support your local community, as many of these groups need extra hands during the holiday season. If you have a particular skill, such as graphic design, writing, legal expertise, or construction, consider offering your services to charities that could benefit from your expertise.
Donating your gently used items can also make a positive impact on those in need. Gather your lightly worn clothes, toys, or household items to donate to shelters, thrift stores, or specific charity drives. Donating canned goods or other fresh groceries to food banks is also a great way to give.
Understanding the Financial Benefits of Charitable Donations
You can attain significant financial benefits through charitable contributions. However, certain criteria and documentation requirements must be met to ensure you can take advantage of these benefits. Follow these tips below so that your donations give back to you.
Tax Deductions
Charitable donations are tax-deductible, meaning you can subtract the amount you donate from your income, resulting in a lower tax. In order to benefit from tax deductions for charitable donations, you must itemize your deductions instead of taking the standard deduction. This is done by filling out Schedule A (Form 1040), Itemized Deductions. Always ensure the charity you donate to is a qualified organization recognized by the IRS. You can ask the organization directly or use the Tax Exempt Organization Search tool on the IRS website.
Make sure to keep detailed records of your contribution, including a bank record or written communication from the qualified organization that includes the name of the organization, amount, and date. In addition to contributions of cash, check, or other monetary gift, you can also deduct the fair market value of any other property you donate (e.g., car, stocks, real estate). If you donate $250 or more (cash or property), you must submit a written acknowledgment from the organization that indicates the amount of the contribution, whether you received any goods or services in exchange for the gift, and an estimate of the value of those gifts.
Appreciated Assets
Donating appreciated assets (e.g., an investment or property that has increased in value since it was acquired) can provide significant tax benefits. Examples of appreciated assets include real estate, stocks and bonds, mutual funds, and even certain collectibles or artwork that have increased in value due to limited availability and collector interest. By choosing to donate rather than sell the appreciated asset, you can avoid paying a capital gains tax, which can result in substantial savings. You can also claim the full market value of the donated asset as an itemized tax deduction, further reducing your tax.
Get tax advice
Talk to a tax professional for more details on how to get the most out of your charitable donations. Or, talk to our dedicated Wealth Management Team to learn more.
Some of our favorite local organizations
Sometimes the best charitable donations are done right at home. Check out this list of a few of the dozens of local organizations that Union Bank supports.
Meals on Wheels of Lamoille County
Meals on Wheels of Lamoille County has provided home-delivered and congregate meals to elders in Lamoille County and Worcester, Vermont, since 1991. They currently provide over 52,000 nutritious meals annually and pride themselves on making meals with love, delivering with a smile, and helping those they serve where they can. In addition to delivered meals, Meals on Wheels hosts weekly community meals at “the Hub,” a new dining room and social space for community elders. The organization even has a pet food program that feeds over 40 pets per month.
Donate, volunteer, or learn more at https://www.mowlc.org/.
Lamoille Community Food Share
The mission of the Lamoille Community Food Share is simple: “to provide food to people in our community who might otherwise go hungry.” The Food Share facility is in Morrisville, Vermont, but serves all of Lamoille County. Food shares are distributed by volunteers and can be picked up by families in need at the facility drive-through. Bags of food typically contain canned goods, milk, eggs, butter, and cheese. Meat, bread, and deli products are also sometimes available. These basic food items help families stretch their food dollar.
The Food Share runs off the support of donations and volunteers. Learn more at https://www.lcfoodshare.org/.
Salvation Farms
Located a few doors down the street from Union Bank’s headquarters in Morrisville, Salvation Farms is a federally recognized non-profit with a mission to build increased resilience in Vermont’s food system through agricultural surplus management. The organization takes surplus produce off farms with no cost to farmers and distributes that surplus to local community meal programs.
Salvation Farms is committed to serving some of our most vulnerable neighbors: the young, sick, elderly, incarcerated, and nutritionally insecure. In addition to helping institutions (hospitals, nursing homes, schools, correctional facilities) and the public meet basic nutritional needs, Salvation Farms also offers education to support community food security. Their work reduces food loss on farms, increases the use of locally grown foods, supports the food security of vulnerable groups, and fosters appreciation for Vermont’s agricultural heritage and future.
There are many ways to support Salvation Farms, including donations and volunteering. Learn more at https://www.salvationfarms.org/
Vermont Ski and Snowboard Hall of Fame (VTSSM)
The Vermont Ski and Snowboard Museum is a Vermont 501(c)(3) non-profit with the mission to “collect, preserve, and celebrate Vermont’s skiing and snowboarding history.” Located in Stowe, Vermont, The museum was established in 1988 by Roy Newton, an editor who resides in Castleton, VT.
The museum is and is a place where the stories, memories, and traditions of skiing and snowboarding are kept alive. Featured collections include retired ski gear, equipment, machinery, signs, and other skiing memorabilia Union Bank is an underwriter for a popular exhibit called, “Searching for Vermont’s Lost Ski Areas.” This is an ongoing project, 20 years in the making, to locate and learn about every defunct Vermont ski area The museum also hosts the Red Bench Speaker Series and the Vermont Ski and Snowboard Hall of Fame. By preserving and promoting Vermont’s rich ski history, the museum cultivates culture, connection, and pride in the local ski community and the entire state of Vermont. Learn more at https://www.vtssm.org/.
River Arts
River Arts is a 501(c)(3) non-profit community arts organization based in Morrisville, Vermont, with a mission to enrich the community through the arts. River Arts is committed to making art accessible to everyone regardless of race, gender expression, age, ability, or financial means. Prior to the founding of River Arts in 1999, there were no arts programs available to most residents of Lamoille County. River Arts offers art classes, access to a pottery studio, concerts, and summer camps.
Your contribution can help River Arts continue to offer classes and events, as well as support financial assistance funds that support River Arts core value that “art is for everyone.” Learn more at https://www.riverartsvt.org/.
Fairbanks Museum & Planetarium
The Fairbanks Museum and Planetarium is a combination natural science museum and history museum and features the only planetarium in Vermont. Located in St. Johnsbury, Vermont, this 501(c)(3) non-profit was established in 1889 by industrialist Franklin Fairbanks and is part of a late nineteenth-century trend to create and expand natural history museums. Their mission is to inspire wonder, curiosity, and responsibility for the natural world.
The museum’s collections and offerings are vast and truly have something for everyone. Inside the museum, you can find over 30,000 objects from an eclectic permanent collection, including natural science specimens, historical artifacts, archival photographs and documents, and ethnological treasures. The planetarium offers an immersive experience of the cosmos. The Fairbanks Museum also offers education services, including summer camps, nature classrooms, and a state-of-the-art STEM lab. Learn more or support these and the other vast offerings of the museum by visiting https://fairbanksmuseum.org/.
Give the gift that gives back
The holiday season can be a wonderful time of giving, togetherness, and abundance. For many people, however, the holidays are a time when financial and social burdens feel amplified. Giving charitable donations during the holiday season is a great way to help support local organizations that serve those in need, donate to causes you care about, and share in the true spirit of giving. Added bonus: you can also benefit financially from these donations through itemized tax deductions and eliminating capital gains tax that would apply with selling (rather than donating) your appreciated assets.
Start planning charitable giving now lest the whirlwind of the holidays take hold and your charitable intentions fail to bear fruit. These donations make a real difference in your community by helping organizations, such as those listed above, provide food, education, and enrichment to real people’s lives. Use the tips above and start planning your charitable giving now, so you can share in the giving spirit that benefits your community, your sense of purpose, and your tax return.
