The How-To’s of Charitable Giving
The end of the year is a time of giving. However, it’s also a good idea to think before you donate. While giving to global charities and community charities is a wonderful thing, it’s also a good idea to make sure that you’re giving in a way that provides maximum value for your giving dollar, and also allows you to take advantage of the tax value of donations.
1. Select a Worthwhile Cause
There are plenty of great organizations out there that are doing good work for individuals, the community, and the world. However, not all causes are created equal. That is why it’s recommended that you research any charity before you make a donation.
For example, some organizations like the Red Cross and the United Way have come under fire for spending a large portion of their proceeds on promotion and executive salaries. It’s not that these organizations don’t do important work, simply consider that other organizations may be able to direct more of the funds you give them toward helping others.
To learn more, do some research at charity rating sites like charitywatch.org or charitynavigator.org. These sites evaluate, and grade charities based on a range of criteria. You may also discover a cause that is less known but doing important work that you will want to support.
2. Get a Write-Off
While giving is its own reward, one of the nice things about giving money to charities is that you can deduct your donation from your taxes. This is why so many give and so many charities seek donations before the end of the year.
However, before you give it’s important to keep the following in mind:
- The charity must have 501(c)3 non-profit status.
- You need to be able to prove that you made the donation. Depending on the size of the donation, most organizations will provide you with a thank you letter acknowledging your donation and specifying the amount given.
- In order to get the deduction, you need to submit an itemized tax return. If you take the simpler, standard deduction, you won’t be able to write off the donations.
3. Give Strategically
Let’s assume that you want to donate $500 to charity before the end of the year and you can give in two different ways.
- Give $50 each to 10 different charities.
- Give $500 to one charity.
There’s no wrong answer, just keep the following in mind.
Giving larger single donations increases your importance to a charity. Many organizations promote different donation levels when they promote their organization, and generally the higher the level, the fewer donors there are. Giving more to a single organization also gives you a greater stake in the organization and greater access to understanding what they are doing and how you can contribute.
This is especially true if you’re donating to smaller organizations that do great work but don’t have as wide a donor base.
Making more donations allows you to spread the wealth around, but don’t forget, every organization that you donate to will add you to their mailing lists, hoping to turn you into a repeat donor. There’s nothing wrong with that, just keep that in mind when your mailbox starts filling up after the first of the year.
4. Give More than Cash
Many organizations are now able to accept donations of appreciable assets such as stock. If you own share of a stock whose value has increased over time, it’s better to donate the stock. Not only does the charity benefit from a donation that keeps on giving, if you’ve owned the stock for more than a year, but you also get to take the current value as a charitable deduction, and you don’t have to pay tax on the appreciation.
Before making this type of donation, it’s probably a good idea to talk to someone in the planned giving department at your preferred charity, and also talk to your financial advisor.
5. Be Loyal
One of the best things you can do for a charity that you care about is to be reliable. That’s because a charity’s cost of reaching a new donor is much higher than keeping someone who has already made a donation. To maximize your donation, stick with a charity for a few years.
If you’re truly passionate about a cause, don’t just donate and forget. Keep an eye on what they’re doing. Follow them on social media, read their blog, download their annual report. If they’re doing good work, promote it to your friends. If you have questions about their work, reach out to them and let them know what you’re thinking.
Want to help out? Talk to us today. AMHFCU is actively involved with supporting many local charities and organizations serving the Philadelphia area and around the world. It’s just a small part of our commitment to serving our city as well as our customers.