The end of the year is upon us, and for many, it’s time to make your final deductible donations for the year. This is a crucial practice that encourages responsible giving to worthy groups, while also allowing taxpayers to reduce their tax burden.
In order to take advantage of charitable deductions, you will need to itemize your deductions on your tax return. This means that taxpayers who instead will use the standard deduction will not benefit. If you are unsure of whether you will be using itemized deductions, we can assist with making some
While it’s true that most charities qualify for tax deduction in return for donations, not all do. So first, you need to verify the charity you are donating to qualifies. The IRS has an online tool that can be used to verify charities, which you can find here. It’s worth noting that some charities, like churches, group ruling subordinates, and governmental units will still qualify but not be listed.
You may also want to check on the effectiveness of your donation. Several organizations will offer background information or ratings of charities. GuideStar is a website that offers data drawn from public filings with the IRS on different charitable organizations for free. A premium membership will also grant you access to raw financial data, letting you see how the organizations spend the dollars they receive on things like marketing and salaries. The Better Business Bureau offers ratings on charities based on a set of benchmarks, and report when charities refuse to release requested data. GiveWell is a relatively new player in the realm of charity evaluations. They use financial analysis to identify how efficiently lives are saved by the dollars donated to different charities. They also offer full access to the research and data they use to make their determinations, and make suggestions of the charity that offers the highest life saving impact per dollar donated. (Currently, their highest rated charity is Malaria Consortium, which offers treatment to prevent malaria in children in sub-Saharan Africa.)
You may want to consider donating locally however. This has the additional benefit of allowing you to be more personally invested in the charity of your choice. Rather than just sending a check, you can also visit and volunteer. Local homeless shelters often need hands to help with laundry or meal service, or you can volunteer with local school programs for benefiting reading skills. Not only does this connect you more deeply with your community, the more holistic approach to giving can lead to a more satisfying experience in the long term.
No matter how you choose to give, we will work with you to make sure it’s reflected on your tax filings correctly to give you the best impact. Call us today to schedule time to review your financial plans.