Make Your Charitable Giving More Intentional

Matt Gray, CFP®

Giving to charity is something many of us feel like we could (and should) do more of. It's often at the end of the year when there is a big push for giving that prompts us to obligatorily write a check. We're so busy with holiday plans that we haphazardly give money (which still helps!), but we do so without much intention.

If you're feeling charitable, read on to get a few ideas on becoming more involved in the charities you give to.

1. Get the Facts Before You Donate

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

For instance, if you are passionate about literacy for at-risk youth, you may not want to fund a charity that focuses broadly on literacy. You may find organizations more target-driven to the cause you are passionate about.

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

2. Review the Organization's Operations

By looking at the financial information behind a particular organization, you’ll gain insight into what its status is and how they truly operate as a non-profit organization. We recommend reading up on the group’s most recent IRS Form 990, which offers a bounty of information. 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.

Form 990 is quite important to review if you want to see how much of your donation will go to programs versus officer compensation. Some non-profits carry large operational costs meaning very little of your gift goes to programs, while others are better at running low-cost operations and funneling dollars to directly benefit their mission.

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

This might seem obvious, but you would be surprised how often people write a check to the Red Cross because they are familiar with it. Maybe they are passionate about Red Cross's mission, but there may be something more personal for you. These might be considered “efficient organizations” or groups that are impactful not only socially but to you as an individual.

You will likely 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 Tax-Deductible

Along with researching before contributing charitably, you should ensure that your donation is tax-deductible. 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.

You may take a tax deduction for contributions made to:

  • 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 

Donating assets other than cash can be a great way to avoid capital gains taxes (taxes when you sell something for more than you bought it) while also providing a benefit to your chosen cause. Speak to your tax or financial advisor about these gifts, as it can be a bit more involved than giving cash, but the benefit is often worth the extra effort!

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.

We find one of the best ways to understand the impact of your gift is to get more involved with an organization. You can more easily see the impact of your dollars, and non-profits are usually happy to share the direct benefit of your giving (especially for larger gifts).

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 itemize your deductions, request a receipt when donating, get an independent appraisal, subtract the value of any benefits, and talk to a tax professional.

Employer Matches
Companies often 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 before contributing to keep your priorities and your finances in order.

About the Author - Matt Gray is a Childfree Financial Planner who holds both the Certified Financial Planner® designation and the Chartered Advisor of Philanthropy designation. He enjoys working with his Childfree peers because he enjoys helping solve the specific needs of the Childfree community. Furthermore, he believes choosing a less traditional life path leads to more unique life stories and he loves helping those stories become a reality.