Year-End Charitable Giving Tips
Writer / Alaina Sullivan
Many people wait until the end of the year to make special donations to their favorite charitable organization of their choosing. It could be the holiday spirit inspiring a little giving or the desire to take advantage of the tax benefits that come along with writing off a charitable donation. No matter what your motivation may be, be sure you donate wisely with the following tips.
Research the organization
Be sure that the organization is organized under state law. “A charitable organization must be both charitable and ‘organized’ under state law,” said Joey Asbury, CPA with Shaub CPA Group. “Thus, your donation is only tax-deductible if the group receiving the donation is organized under state law as a corporation, trust, foundation, etc. Donations to individuals or ‘unorganized’ groups are not tax-deductible.”
Asbury said the donation must be to a “qualified done organization,” a tax code category that includes charitable organizations, governmental bodies, war veterans’ organizations, domestic fraternal lodges and cemetery organizations.
Know where your money is going. If the cause of Type 1 diabetes research is close to your heart, be sure that the money you are giving to an organization claiming to benefit this type of research actually goes toward that cause. Read up on the charity and research its ratings from sites such as CharityWatch or CharityNavigator. Charities have an obligation to provide information when requested from donors, and this information can include where your money is going. Are you paying for general administration or funding a unique program?
Choose an organization that is financially stable
Seek out a charity that is financially stable, continually stays out of debt and funds its current programs. Look at the trends in the organization’s finances across several years. CharityWatch.org says not to be swayed by seeing a negative number on one year’s financial statements. Examine the organization’s financial statements over several years.
Financial statements can be intimidating. Luckily, sites do exist for the sole purpose of determining the financial stability of various nonprofit organizations. Look online for an “Independent Auditor’s Report” (IAR) to see the rating of a specific charity, CharityWatch recommends.
Always keep a record and be careful with your information
You cannot claim a charitable deduction if you do not have proof of your donation. CharityWatch strongly recommends donors never give cash donations, and be sure a paper trail and proof of the donation exists. Maintain your security by not freely giving your credit card number, and be sure a website is secure before entering your credit card number to make a donation.
However, if you insist on donating via cash donation, Asbury said to ensure you have the proof. “For less than $250, a canceled check will suffice. For a donation over $250, you must have a letter or receipt from the organization.”
If you choose to donate in-kind goods to a charitable organization, be sure to keep all of your receipts. ”Don’t forget to keep all of your Goodwill and Salvation Army receipts,” said Asbury. “Non-cash contributions are also tax-deductible, but you must have a receipt, and you must use a reasonable fair market value for the donation.”
The moral is do your homework. Charitable donations are rewarding as well as beneficial to your tax return. Just make sure you go about it the right way.