Top Strategies for Charitable Giving
We all have certain causes that we choose to support monetarily. In fact, in 2017, Americans gave more than $410 billion to charities, breaking the $400 billion mark for the first time in history.
But anytime that we give our money to an organization, it’s important to do our due diligence, ensuring that the funds that we give will be used effectively.
There are several ways you can do this, starting with using the resources provided from websites such as GuideStar.org and CharityNavigator.org. Both of these sites offer a tremendous amount of information on all registered charities, along with quick access to the organization’s 990 as well. And if you don’t have a charity picked out, but have a cause you want to support, you can search available giving options as well. Here are a few things you want to consider when deciding whether to support a charity:
- Be sure to check their IRS status as a public charity. There are many private foundations that also accept donations but may not be able to provide you with a tax deduction. If being able to write off your deduction is important to you, be sure to research this prior to making a donation.
- Be wary of the Overhead Myth, which determines nonprofit worthiness based on the amount of administrative versus program costs. Remember, administrative overhead costs can be misleading. When giving to an organization, you certainly want to make sure that they are using your donation wisely, but focus on programs offered and their effectiveness; not just what their administrative costs are.
- When deciding to support an organization, consider non-cash donations such as appreciated stock, which will allow you to take a tax deduction for the value of the stock without the need to pay the capital gains tax that you would pay if you sell the stock and donate the cash received.
- Depending on the organization that you are donating to, you may also want to consider other non-cash items such as art, jewelry, or even an automobile or real estate. But be sure to check with the organization prior to donating to ensure that they can accept these items. Some smaller charities may not be in a position to do so.
- Consider naming your favorite charity as a beneficiary for your life insurance policy. You can make them a partial beneficiary or gift them the policy, where you’ll be able to take a tax deduction.
- Consider creating a donor-advised fund, which allows you to take a tax deduction when you contribute to an investment account that can be used to make a gift to a charity. Donor-advised funds are especially helpful in years when your income is temporarily increased as a result of events like selling a business or selling other large assets.
- If you’re cash poor, but skilled in an area that a nonprofit can benefit from, consider donating your time. Nonprofits can use a variety of skills, such as legal and accounting work, as well as writing and marketing skills.
When you do donate to a charity, be sure that you receive acknowledgement of your gift; particularly if the donation is more than $250.00, as the IRS requires all gifts in excess of $250.00 to have a written acknowledgement.
Supporting a charitable organization is rewarding. Be sure that your giving is used appropriately.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.