According to the Giving USA 2019 report, in 2018, there was a $20 billion increase from slightly over $400 billion donated in 2017. The donations mostly went to environmental causes, higher education institutions and disaster recovery projects.
Before you decide to donate, there are certain things financial advisers would want you to know. We’ll explore some of these in a little more detail below.
What Should You Know Before Giving to Charity
Making charitable contributions has the advantage of the “feel good” factor for the individual. You can also benefit from tax incentives. Talk to your financial adviser so that you can plan appropriately. Consider the following before writing that check.
1. What Charity Are You Donating To
Many people will donate money to charities that deal with issues close to their hearts. It could be about health, economic issues, social issues or even arts and culture. Make sure that they are using your money efficiently and effectively.
Look at the reputation of the programs they’re running, so that you’re sure that your money is making a difference. Factor in whether they get tax deductions because not all non-profit organizations qualify.
Remember there are so many organizations you can donate to, and it can get confusing. With over 1.5 million registered charities, you need to use the resources available to find the right one. Don’t rush the process, avoid telemarketers who’re asking for money, seek relevant facts and most importantly follow your gut instinct.
Avoid sharing any personal information because you can never quite know who you’re dealing with. Be especially careful about any new organization, because many scammers are operating under the guise of charities.
2. Organize Your Donations to Charities
Donating money to charities is very much like coming up with a business plan. It’s not something you do on the whim of the moment. Try and spread your donations, so that you avoid giving to the same charity over and over again.
Also, ensure that you get a receipt so that you use it for your tax returns.
3. Donating to Appreciated Stocks or Assets Is a Good Idea
You could have avoided paying capital gains tax by donating appreciated stock. The value of the charitable tax deduction will be the full market value, thus savings for you. You will not get the same benefit if you donate cash.
The charity then has the option of selling the stock when they require money for a mission. If you’re giving money to those you love, give them appreciated stocks so that when they sell the assets, they pay less tax.
If you’re dealing with depreciated assets, sell them yourself and give away the cash. You’ll have to bear the tax loss.
4. Gift Tax Exclusions
It’s a good idea to take time to think before you donate. It’ll help you choose the right option. You can, for example, give up to $15,000 as an individual, or $30,000 together with your spouse. You’ll not face any consequences with regards to the gift tax; neither will you require filing a gift tax return.
The best way to do it is to spread your donations as opposed to giving it all at once. You can also avoid gift tax by donating to medical or educational institutions, or paying tuition for healthcare bills for an individual. Talk to your financial adviser on the different consequences of making the donations.
5. Life Insurance Is an Excellent Way to Donate to Charity
You have many options concerning contributions. You can donate a car to charity, or even give a life insurance policy. The death benefit amount will be larger than if you give cash. You also have the option of changing beneficiaries without having to explain yourself to anyone.
If you don’t want to deal with the hassle, you can give up full control of the policy to the charity, but continue to have it as a deduction on your income tax. You’ll enjoy the tax benefit if you continue to pay the premiums.
6. Non-Cash Donations; Best Charity to Donate To
You’ll find several items in your home that you have no use for. How about using this as your donation instead of giving out money. You help retain your cash flow while getting rid of clutter. Since it is a donation, don’t give out anything that no longer has value.
Only donate what you can still use; meaning it should be in good condition. Make sure you have receipts for anything less than $250. Also, have a written acknowledgement for anything you donate that is $250 or more. You may also need an appraisal for items worth $500 and above.
Your time can also be a valuable asset. Volunteer services for certain missions, and enjoy tax deductibles by noting your expenses like auto mileage.
7. Charity Should Not Be a One-Off
Giving donations to charities should be part of your life plan. Allocate charitable donations by setting up trust funds two organizations or even family members. Depending on the advice your financial adviser gives you, you can provide an income to charities long after your demise. A good plan will also include your beneficiaries.
Donor-advised funding will also allow you to claim the tax deductions for any money you give to an investment account, for a charitable organization. You get to recommend how you’d want the money allocated.
By having a plan, you don’t have to deal with every appeal that comes your way. You only give to those you really care about and can leave a lasting legacy.
Donating to Charities Is Fulfilling
We’ve shared with your seven important factors to consider when thinking of giving to charity. You have the benefits of tax deductions and the peace of mind of knowing that you are doing your bit to make a difference in this world. Getting proper legal and financial advice will protect you in the long run.
Remember, it is not all about giving to every charity out there; it requires a more organized thought process on your part to be able to make the most difference. You need a plan, and we can set you on the right path. Contact us for more information.