The Giving Season: Six Tips for Making Smart and Effective
Charitable Donations This Holiday Season
The holidays are a popular time for charitable donations.
With so many charities to choose from, it's more important than ever to ensure
that your donation is well spent. Here are six tips that can help you make
smart and effective charitable donations.
1. Choose your charities wisely
Choosing worthy organizations that support the causes you
care about can be tricky, but it doesn't have to be time-consuming. There are
several well-known organizations that rate and review charities, as well as
provide useful tips and information on how to donate and choose a charity (see
sidebar). To get started, here are some things to consider:
How the charity plans to use your gift. Contact the
charity by phone or go online to find information about the charity's mission,
accomplishments, financial status, and future growth.
How much the charity spends on administrative
costs. If a charity has higher-than-average administrative costs, it may be
spending less on programs and services than it should. This could also be a
sign that the charity is in serious financial trouble. In addition, if a
charity uses for-profit telemarketers, then it may get very little of the money
it raises, so ask how much of your donation the charity will actually receive.
The legitimacy of the charity. Take the time to
check out the charity before you donate. Ask for identification when approached
by a solicitor, and never give out your Social Security number, credit-card
number, bank account number, account password, or personal information over the
phone or in response to an email you didn't initiate.
How much you can afford to give to the
charity. Stick to your giving goals and only give what you can afford.
Legitimate fundraisers will not try to pressure you and will be happy to send
information that can help you make an informed decision regarding your
2. Maximize your donation through a matching gift
If your employer offers a program that matches charitable
gifts made by employees, you can maximize your charitable donations. Some
matching gift programs may have specific guidelines — for example, they may only
match a gift up to a certain dollar limit, and the charity may need to provide
3. Make automatic donations
If you're looking for an easy way to donate regularly to a
favorite charity, consider making automatic donations from a financial account.
Automatic donations can benefit charities by potentially lowering fundraising
costs and by establishing a foundation of regular donors. You'll also benefit,
since spreading your donations throughout the year may enable you to give
more and simplify your record keeping.
4. Look for alternatives to cash donations
Although cash donations are always welcome, charities also
encourage other types of gifts. For example, if you meet certain requirements,
you may be able to give stock, direct gifts from your IRA, real estate, or
personal property. Keep in mind that you'll want to check with your financial
professional to assess potential income and estate tax consequences based on
your individual circumstances. Other alternatives to cash donations include
volunteering your time and using your talents to improve the lives of others in
5. Consider estate planning strategies when gifting
Another option is to utilize estate planning to make a
charitable gift. For example, you might leave a bequest in your will; give life
insurance; or use a charitable gift annuity, charitable remainder annuity
trust, or charitable unitrust that may help you give away the asset now, while
retaining a lifetime interest. Check with your financial or tax professional
regarding any potential estate or tax benefits or consequences before making
this type of gift.
6. Remember the importance of record keeping
If you itemize when you file your taxes, you can deduct
donations you've made to a tax-qualified charity — however, you must provide proper documentation of your donation to the IRS. Keep
copies of cancelled checks, bank statements, credit-card statements, or
receipts showing the charity's name, date of your donation, and contribution amount. For donations or contributions of $250 or more, you'll need a
detailed written acknowledgment from the charity. For more information and
a list of specific record-keeping requirements, see IRS
Publication 526, Charitable Contributions.