Top Strategies For Charitable Giving

Kolleen Schocke |
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We all have certain causes that we choose to support monetarily. In fact, in 2020, Americans gave more than ever to charities that supported COVID-19 relief and social justice causes close to their hearts, totaling an all-time high of $471 billion![1]

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, start by using the resources provided from websites such as GuideStar.org and CharityNavigator.org. Both sites offer a tremendous amount of information on all registered charities, along with quick access to the organization’s 990 (IRS Form 990 is an informational tax form that most tax-exempt organizations must file annually).  If you have not yet chosen a charity, but have a cause you want to support, you can search available giving options on these sites 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 donating.

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. To help you decide if your intention aligns with the organization, 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.

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 acknowledgment 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 acknowledgment.

Supporting a charitable organization can be rewarding. Be sure your giving is used appropriately.

 

 

 

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[1] https://theconversation.com/americans-gave-a-record-471-billion-to-charity-in-2020-amid-concerns-about-the-coronavirus-pandemic-job-losses-and-racial-justice-161489