Tis The Season To Be Giving

Last year was a good year for charity, according to the Wall Street Journal.  Total charitable donations topped $300 billion for the first time ever in 2007, an increase in 3.9% over 2006.  The slowing economy may take its toll on charitable giving this year, but even if it falls a bit short, $300 billion is a lot of money.  If you plan on supporting a worthy cause this holiday season, follow this charitable-giving check list to make sure both you and your cause get the most from your donated buck.

Benefits Of Donating To A Qualified Charity

There are many benefits to donating to charity, including

• That warm funny feeling knowing you’ve helped those in need
• Helping to achieve positive change in the world, be it curing a disease, feeding the poor, or helping a child get an education
• A nice, fat tax deduction

Not All Charities Are Created Equal

Not all charities are created equal, however.  Furthermore, some “charities” are nothing more than cleverly-disguised scams designed to take advantage of the good will of others.  Getting caught up in one of these scams is a double-whammy since a.) your cause won’t see a dime and b.) you don’t even get a tax deduction for your trouble.

Usually, a valid charity will be registered as a 501(c)3 non-profit organization.  If the charity you’re thinking of giving to isn’t registered as a 501(c)3 and doesn’t file Publication 78 with the IRS, there’s a reasonably good chance your potential charity is a scam.  You can find out if your charity-of-choice has filed Publication 78 using the IRS’s Publication 78 search form.  Very small charities aren’t necessarily required to file Publication 78 so it’s not a fool-proof method, but it’s pretty close.  If you really want to donate to a small charity, you’ll have to do some homework.  Ask your charity’s contact to prove their 501(c)3 non-profit status.  If they can’t, move on.

Now that you’ve verified your charity-of-choice is actually a real charity, it’s time to evaluate whether or not its really the best recipient for your hard-earned money.  This is actually pretty easy.  Just enter your charity’s name into Charity Navigator’s or GuideStar’s search box for a detailed report of that charity’s operational efficiency and exactly what percentage of your donation will go to those in need and not the charity’s administrative expenses.  For example, here is Charity Navigator’s report on the American Red Cross.  As you can see, it gets pretty good marks so you’re probably safe donating your money here.  If your charity gets poor marks and you decide to donate anyway, at least you’re going in with your eyes open.

Save Your Receipt

I’m extremely guilty of donating small amounts to various charities throughout the year and then forgetting about it at tax time, costing me hundreds of dollars per year in missed deductions.  Don’t let that happen to you.  Recently, I’ve started organizing my financial information (tax info, charitable giving, insurance info, etc) in labeled folders.  Before doing my taxes, I’ll pull out the “Charity” folder and review exactly how much of a deduction I’m entitled to, just to make sure I don’t miss anything.  

Follow these tips and you’re sure to have a happy, generous holiday season.