According to the chief executive officer of the National Philanthropic Trust, Eileen Heisman, Americans tend to “spend a lot more time looking into restaurants than they do thinking through their charitable giving.” But there are steps you can take to make sure your charitable donations go further this giving season. A recent article from CBS News highlights a few tips to make effective giving easier.
Tip #1: Homework is still important. While we may all wish it would stay in our school years, doing your homework on the causes you give to is very important. Think through what causes mean the most to you and evaluate the benefits of giving to local charities over larger, broader organizations. Then the real investigation begins: check out websites and social media profiles to learn more about the organization, read annual reports, see what news coverage they’ve received or reviews they’ve gotten. You can also take advantage of sites like Charity Navigator, GuideStar, CharityWatch and GiveWell to make sure these charities use donations effectively, responsibly and transparently.
Tip #2: Budgets are important in giving, too. If you set a budget, you’re more likely to spend wisely. We know it works with our monthly spending, but it applies to giving, too! While that charity you see in your Facebook news feed might be a great one, it’s better to make a plan and an informed donation than a spur-of-the-moment decision. Plus, if you make a budget, you may be able to give a larger donation to a few charities you select rather than small donations to numerous organizations.
Tip #3: Let IRS guidelines guide you. If you’re looking to find out whether it’s really as blessed to give as to receive, then make sure you’re following IRS guidelines. If you’re looking for the tax deduction, the charity must be a qualified 501(c)(3) organization and your donation must be made by December 31st. Any checks must be in the mail by the 31st and any donations charged to a credit card must be charged prior to that date, though you’re not required to pay the bill at that time. Also, if you receive anything back from a charity for your contribution, only the portion of your gift above the value of what you received in return is deductible.
Tip #4: Not every donation must be cash. While not all charities are able to do so, people have historically donated real estate, coin collections or even just time to charitable organizations. If you’re still looking for a tax deduction, the IRS does have specific rules about non-cash donations. One option might be to donate highly appreciated investments like stocks, bonds, or mutual funds. You could get a deduction for the fair market value of your donation without having to pay capital gains taxes. Make sure you’ve done your research ahead of time and spoken with your accountant or financial professional before you go for this option.
An important caveat for some of our clients: if you’ve done irrevocable trust planning to protect assets from the nursing home (what we often call a “lockbox”), you need to be careful. Be very cautious of making any gifts to family members, charities or making payments on behalf of another. For our clients, please consult our office before making any such gifts.
A little planning can go a long way for the organizations you care about. If you want to learn more about how charitable giving can be a significant part of your estate planning, explore our website and contact us to schedule your consultation today!
Reference: CBS News (November 14, 2016) “’Tis the Season for Giving Back”