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.
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.
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.
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.
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.
- 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
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!
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).