These smart strategies will ensure that you get the most bang for your charitable buck.
Farnoosh TorabiO, The Oprah Magazine
Shopping for gifts isn't the only reason so many of us break out our credit cards and checkbooks in December: According to Blackbaud's Charitable Giving Report, it's also the most popular time to make a charitable donation. Why? "People are in a giving mindset at this time of year," says Jacob Harold, president and CEO of GuideStar, a site that gathers information on nonprofits. "And of course, there's the tax deduction."
To qualify for a break from Uncle Sam for your 2016 taxes, you must make donations by December 31. If you haven't given already, that's a solid reason to consider being charitable before New Year's Day rolls around. But the organization you pick and the way you give are just as important as your timing. Here, four ways to help your contribution make the greatest possible impact.
Do Your Homework
Credit: Randall Barriga
Choose a cause with your heart, then “select an organization with your head,” says Harold, whose website aims to give donors clarity when it comes to picking the right charity: Are its goals and strategies precisely defined? Does it share specific results? If a group’s mission is vague (“to end poverty”), your money will probably be better spent elsewhere. If it provides details and stats about budget, approach, and outcomes, you can feel more confident about giving your dollars.
Follow these guidelines to make sure nothing gets between you and the tax deduction you deserve.
-To earn a deduction, you must be giving to a qualified 501(c)(3) charity or other exempt organization. Double-check at IRS.Gov.
-Avoid cash gifts. Checks and credit cards make record keeping easier.Get a dated receipt with the name of the organization and amount of each contribution.
-For any property you donate—say, clothing or appliances to the Salvation Army or Goodwill—you can generally deduct the fair market value. (Check Publication 561 on the IRS website for guidance.)
-Itemize your deduction on Form 1040, Schedule A, of your tax return.
Brush Off Telemarketers
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To maximize your donation (and avoid potential credit card fraud), never give your financial information to a solicitor over the phone. Many times, charities hire costly third-party firms to drum up money. “Returns can be pennies on the dollar,” says Sandra Miniutti of Charity Navigator. “It’s best to give directly.”
The Cost of Doing Business While overhead is an unavoidable expense, larger organizations with $1 million or more in annual revenue should spend at least 75 percent of their budget directly on their programs, says Miniutti. For smaller ones, however, “it can take time to hit that level of efficiency, so just make sure the bulk of their money is going to programs,” Miniutti adds. “Don’t hesitate to ask questions.”
Automate Your Giving
If you wish you had more time or money to donate, try apps to help streamline the process:
Bstow: For each purchase via your debit or credit card or checking account, Bstow rounds up to the next dollar and uses the change, minus a small fee, to make tax-deductible donations to your pick of the approximately 1.5 million charities in the IRS database. Set a monthly max to avoid exceeding your budget. The app tracks your total, so end-of-year paperwork is a breeze.
ChangeBowl: Like Bstow, the ChangeBowl app collects your “change” from purchases and is connected to the IRS’s nonprofit database, but you can opt for recurring payments or let funds accumulate and cash out with a bigger gift when you’re ready. The app also grants you easy access to records of your donations, though you may need to contact individual charities for a tax receipt.