Your Year-End Guide to Charitable Giving
As another holiday season approaches, giving back is something many of us wish we could do more. There are many different ways to give back to your local community. One thing to keep in mind is the tax benefits associated with charitable giving could potentially enhance your ability to give back even more. If you're considering making a donation this year, be sure to keep these few tips in mind.
Selecting a Reputable Organization
In order to maximize the impact of your donation, it is important to research reputable and transparent organizations. If you are questioning a charity's validity, use the Tax-Exempt Organization Search tool on the IRS website, irs.gov, to verify if the organization is designated with 501(c)(3).1 Other valuable resources are websites such as Guidestar and Charity Navigator. These sites allow you to gain insight into the status of an organization and if it truly operates as a non-profit organization. Knowing the impact of the organization you’re interested in might determine what, and how much you decide to give.
Many charitable organizations qualify for tax-deductible donations, but not all, making it important to know whether your chosen organization qualifies. Here is a list of organizations that are tax-exempt under section 501(c)(3)2:
- 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
Other Ways to Donate
Not everyone has the means to give a cash or check donation, but there are plenty of other ways to donate that are of equal value. Volunteering is a great way to give back to your community. Not only can you donate your time and money, you can also donate things that are no longer of use to you like books, toys, clothes, etc,. Lastly, be sure to check with your employer. Companies will often offer Employee Matching Gift Programs, which are giving programs in which the company matches donations made by employees to eligible nonprofit organizations.3 These are great examples of ways to maximize the impact of your donation.
Various exemptions apply when donating. 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.4