Here’s the Lowdown on Charitable Donations
Did you know that you can deduct up to 50% of your donations to qualified organizations? Whether you donate your hard-earned money regularly or you’d like to but aren’t sure how to go about it, read this article and make sure that you don’t miss out on a significant reduction in your tax liability!
About Charitable Donations
You probably make donations because you want to help those in need, not because you hope to benefit from it. However, if you can receive a tax break, you may as well. In order to do so, you should be familiar with these stipulations from the IRS:
- First, make sure the charity is on the list of organizations that can accept deductible donations. Unfortunately, your donations to individuals are not deductible. The easiest way to check if an organization fits the bill is to obtain their EIN and search it at irs.gov
- Know that there are limits on the deduction you can claim for your donations. The specifics change from case to case. For example, one limitation is that you cannot deduct a donation for which you received a benefit. If you received a CD in exchange for a donation, you can only write off the difference between the value of the CD and the donation. More information can be found by reading IRS Publication 526: irs.gov/publications
- You’ll need a receipt or written statement of acknowledgment from the charity you choose, especially for cash donations. Additionally, you’ll need strong documentation of the value of non-cash items. For example, you can’t donate a clunker and deduct $30,000. More information on the valuation of non-cash donations is included in IRS Publication 561: irs.gov/publications
Charitable Donation Ideas
If you’d like to donate, but you’re not sure of any charities to trust your funds to, here are a couple great organizations doing important work:
- Child Find of America: Child Find is dedicated to locating missing children, as well as preventing abduction and abuse. EIN: 22-2323336, www.childfindofamerica.org.
- Proliteracy Worldwide: Proliteracy “Champions the power of literacy to improve the lives of adults and their families.” EIN: 16-6076384, www.proliteracy.org.
Vetting an Organization
Of course, there are countless other great charities advancing worthwhile causes. However, there are also plenty of organizations that are less than ethical with donations. They may only spend a small fraction of your donation on the cause they claim to support ¾ the rest goes to fundraising or administrative costs. Some organizations may not publicly disclose financial information at all. How can you be confident that your donation is going where you’d like it to?
Fortunately, there are three watchdog organizations that evaluate charities so you won’t have any doubts about where your money is going: BBB Wise Giving Alliance, CharityWatch and Charity Navigator. Each uses a different set of criteria for “grading,” but they all have a reputation for maintaining high standards. If your charity of choice is highly rated on all three, you can rest easy that you’ll be making a difference by signing the check. Follow these links to their sites:
Donating to charity is always great. However, when you can donate to an organization qualified for deductible donations, it’s a win-win for everyone!