Have you recently acquired a substantial amount of wealth? Are you considering donating some of the money to different charities?
Whether you’re looking to donate a large amount of money or simply make a small donation, planning your charitable contributions is important.
If you don’t plan properly, you could end up donating money to an illegitimate charity or another scam, or make a donation that doesn’t end up being tax deductible when the end of the year rolls around.
These two mistakes are all-too-common, which makes planning your charitable gifts even more important.
Below are 10 helpful tips for donating money to charity, so you don’t make any mistakes with your money.
1. Pick a Charity That’s Important to You
Before you can donate your money to a charitable organization, you have to find one.
Think about what’s important to you. What causes really fire you up? If you could change anything in the world, what would it be?
Whether you’re passionate about ending domestic violence, sex trafficking, or world hunger, there’s a charity that will happily accept your monetary donations. After you have made a decision on where you want to focus your donation, it’s time to decide if you’re going to keep your donation local, regional, national, or international.
The great thing here is that it’s completely your call. It is your money, after all. No one can tell you where you have to donate.
2. Verify the Legitimacy of the Charity or Charities You’ve Chosen
When you’re donating money to charity, this is a crucial step.
If you don’t verify that the charity is, in fact, legitimate before you donate, you could end up donating money to an organization that uses more of your money to line their pockets than it does to feed the children. Or worse, you could donate it to a corrupt organization or person whose sole reason for collecting donations is to profit off of them.
Neither of those situations would be your preferred outcome.
If you want to avoid donating to a scam, you can use the following two websites to verify the credentials of your chosen charity:
Both of these organizations vet nonprofits so you don’t have to.
This is a simple step, but when it comes to charitable planning, it’s not one to take lightly. Don’t skip it, or you may end up throwing your money away.
3. Keep an Eye on Their Administrative Expenses
Before donating your money, it’s a good idea to confirm that it’s going to be spent wisely.
Of course, charitable organizations will have administrative expenses just like any other organization, but it’s important to ensure that the money used for these expenses does not outnumber the amount of money that they are using to fund programs. If you pull their reporting and find that their contributions to expenses are far beyond those to their programs, there’s a problem.
Save your money and find a different charity to donate it to. Preferably one that values their programs more.
4. Make Your Money Work
If you donate to the same several charities, your money will go farther than if you donate smaller amounts to many different charities. Why? Many charities have fees they will deduct from your donation, meaning less of your money is going directly to the cause you’re looking to support.
5. Donate Directly to the Charity Itself
In other words, don’t donate money over the phone to a solicitor you don’t know. There’s always a risk that they might not be legitimate and could be taking the money they receive and profiting off of it.
6. Itemize Your Donations
To claim a deduction on your taxes, you need to itemize it. When it comes time to file them, you can use Schedule A on the form 1040 to itemize each of your deductions. Be sure to include your donation on lines 16-19.
7. Donate to Qualified Organizations
If you’re hoping to deduct your donations from your taxes, you’ll need to donate your money to qualified organizations which are determined by the IRS.
If you want to confirm the status of a charity, call the IRS.
8. If You Want to Deduct Your Donations, Donate to Organizations, Not Individuals
No matter how much the individual needs or deserves your contribution, you won’t be able to deduct donations to individuals on your taxes. Keep this in mind if you want to be able to deduct your donations, and donate only to the qualified organizations mentioned in the previous tip.
9. Get a Receipt
Are you looking to make a charitable donation in cash? If you are, and you want to claim it as a deduction on your taxes, you’re going to need to have a receipt to back it up.
Be sure that it includes the date, the amount of the donation, and the name of the charitable organization that received the money. To claim a deduction, you’ll need to donate $250 minimum and then have the qualified organization provide you with a form of acknowledgment.
No matter what amount you donate, don’t forget to ask for a receipt!
10. Deduct Expenses Related to Volunteering
If you’re considering donating to charity, you may also be considering volunteering.
While your time is not tax-deductible, any expenses you incur as a result of volunteering are. See tip #9 and always get a receipt.
Some Closing Words on Donating Money to Charity
Donating money to charity is a great way to relieve yourself of extra funds while also doing something that will benefit a good cause.
To donate the smart way and ensure that your charitable gifts are, in fact, tax-deductible, just take these tips into account before making your next donation.
If you’d like some assistance with your charitable planning efforts, don’t hesitate to contact Rhodes Law Firm today.
Our team will work with you to ensure that we answer each of your questions and can provide you with the help you need.