6 Must-Knows Before Planning Your Charitable Contributions

FAI Wealth Management

Whether it’s the beginning or nearing the end of the year, giving is something many of us feel we’d like to do more of. When it comes to holiday contributions, we often feel too stressed with all the things going on to do the proper research before diving in. However, it’s important to keep in mind a few details before giving to any charitable organization. 

Feeling charitable? Read on to prepare with six details to keep in mind before jumping in. 

1. Get the Facts Before You Donate

Understanding the charity’s mission and what their true purpose consists of is key when contributing. Without determining  where your donation is really going you may ultimately be given to the wrong cause. 

Start your research by using websites such as Guidestar and Charity Navigator to get a real understanding of what makes them tick.  Knowing the impact of the organization you’re interested in and what the outcomes are of their programming, might determine what and how much you decide to give. 

2. Verify the Group’s Non-Profit Status 

By taking a look at the financial information behind a particular organization, you’ll gain insight into their status  and how they truly operate as a non-profit organization. We recommend reviewing the group’s most recent IRS Form 990, which offers a bounty of information. You can find Form 990 at the IRS Tax-Exempt Organization Search

By focusing on a few key areas, these forms won’t feel so overwhelming: 

  • Part One: The organization’s revenue statement. 
  • Part Three: A list of the organization’s largest activities and how much it spends on them. 
  • Part Seven: Compensation for officers and board members. 
  • Part Nine: Functional expenses statement, which outlines costs related to program services, management and fundraising. 

3. Donate to the Causes That Mean the Most To You

These might be considered “efficient organizations” or groups that are impactful not only socially but to you as an individual. It’s very likely you already have a few organizations in mind based on your experiences and your network. If not, connect with your friends and family to learn more about their charity interests and if these align with what you’re passionate about. 

Doing web research or collecting news articles associated with causes you’ve already chosen will often highlight similar organizations that are also doing great work. 

4. Make Sure Your Donation is Deductible or can be used as a Qualified Charitable Distribution from your IRA

Along the lines of doing your research prior to contributing charitably, you should ensure that your donation is tax-deductible, or is eligible for use as a qualified charitable distribution (QCD) from your IRA. You must donate to a qualified charitable organization and they must be tax-exempt 501(c)(3) or fall under Section 170(c) of the IRC.1

The following types of charities are generally eligible for deduction or QCD: 

  • Churches and other religious organizations
  • American Red Cross, Goodwill, the Salvation Army and CARE
  • Tax-exempt educational organizations
  • Tax-exempt hospitals and some medical research organizations
  • Government agencies, such as a state or division of a state if the funds are used for public purposes
  • Nonprofit volunteer fire companies
  • Some veterans' groups and fraternal societies 
  • Some private foundations that distribute the contributions they receive to public charities, and some private operating foundations
  • Some membership organizations that receive more than a third of their contributions from the general public
  • Boy Scouts and Girl Scouts of America
  • Boys Clubs and Girls Clubs of America

Many charitable organizations qualify for tax-deductible donations, but not all, making it important to know whether your chosen group qualifies. You may search in the IRS online database for all of the acceptable charities, or check to see if the organization is designated with 501(c)(3).

5. Donate More Than Just Cash 

While giving a cash value might feel like the most straightforward way to contribute, there may be other forms of assets you can donate in order to get the most back. Depending on the accessibility of your assets, contributions may include forms of property, travel expenses, uniform costs or appreciated assets. 

Being creative with your donations offers the opportunity to rid yourself of items that you no longer use but could mean the world to someone with different needs. 

6. Feel the Benefits    

Giving to those in need and being a voice for organizations that spark passion within you is an amazing feeling. Being aware of the additional benefits that being charitable may offer can be a close second.

Tax Exemptions

Various exemptions apply when donating and if you are sure to keep in mind a few details, you will feel the perk of giving back in a few ways. Always remember to  request a receipt when donating, get an independent appraisal, subtract the value of any benefits and talk to a tax professional. 

Employer Matches

Very often companies encourage their employees to give back to their communities by matching contributions up to a certain amount. It’s important to speak with your human resources department about these details prior to contributing in order to keep your priorities and your finances in order. 

  1. https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

By FAI Wealth Management

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