With President-elect Trump’s campaign promises to overhaul the tax code, many are taking the opportunity at year-end to make significant charitable donations. Non-profits and other charitable institutions anticipate 2016 will be a record-breaking year for donations as people capitalize on charitable tax deductions Trump’s administration could make less valuable. As you look at year-end opportunities to donate to your favorite charities, take advantage of this checklist from a recent Chicago Tribune article to ensure your donated dollars go a long way.
1: Check whether it’s a legitimate charity. Unfortunately, fraudsters know we all feel more charitable this time of year, too. Some scammers contact people using a name similar to a well-known charitable institution, but the IRS has created the Exempt Organizations Select Check for just that reason. The EO Select Check allows taxpayers to look up an organization’s federal tax status and filings. If they’re a legitimate exempt organization, this tool will let you know.
However, you should be mindful that “tax exempt” does not necessarily mean “tax deductible.” While most of us are looking for a tax deductible donation to minimize our tax burden for the year, not all donations to tax exempt organizations (those who don’t have to pay taxes) are deductible. The EO Select Check can help you determine whether your donation to a specific tax exempt organization is deductible.
2: Do your research. Not all charities are fiscally equal. Once you’ve determined an organization is legitimate, you need to do your research on their financial responsibility. Websites like Charity Watch and GuideStar can help you ensure your donation goes to a fiscally responsible and stable organization and the Better Business Bureau’s Wise Giving Alliance publishes their list of charitable organizations both on their website and with additional information at Give.org. These sites can even help you understand how much of your donation goes to the cause versus overhead costs.
3: Giving doesn’t have to be in cash. Until you’ve done your research, don’t give out financial information, send cash donations or wire money. While sending a check or donating online via credit or debit card are both popular methods, some charities allow you to donate appreciated stock. While not all are able to accept stock donations, it’s a good way to get a tax deduction for the full value of your stock without being subject to capital gains taxes. On Monday’s blog post, we’ll take a deeper dive into donating stock.
Just make sure all donations are completed by December 31st. If you’re sending a check in the mail, it must be postmarked by December 31st to count as a deduction on your 2016 tax bill. Donations via credit or debit card are deductible based on the date the transaction hits your account. It can take a few days, so make sure you plan a bit ahead if that’s your preferred method.
4: Keep your records. Any donation of $250 or more must be accompanied by a receipt. The receipt must have the charity’s name, the date and amount of the donation along with a description (cash, stock, etc.). Some organizations now allow you to donate via text message. For any texted donations, you’ll want to save the phone bill with the donation amount, organization’s name and the date of the donation.
‘Tis the season for giving, and with this checklist, hopefully your donation will go further. If you’d like more information on how charitable planning could benefit your estate, explore our website and contact us to schedule your consultation today!
Reference: Chicago Tribune (December 14, 2016) “Making a year-end charitable gift? Use this checklist”