How to Be a Smarter Charitable Giver This Holiday Season
Filed under: Life Events
December is the time when most of us open up our wallets and give to our favorite causes. That makes sense, given it’s the holiday season and the time when most people are in the midst of end-of-year tax planning. And while your main motivation is likely to help out the causes you care most about, you can also take advantage of tax deductions associated with charitable giving.
However, there are risks involved with charitable giving. It could be that your gift isn’t tax-deductible or that the funds you give aren’t being used for their intended purpose. There are ways to avoid the risks associated with donating to charities. Below are a few things to think about before you decide to give this year:
Is the charity registered?
In order for you to receive tax benefits for your giving, the charity must be registered. The process for registering varies from state to state, so it might be a good idea to check with your secretary of state or your state’s Department of Justice. Charities must also register with the IRS, and any charity that you donate to should provide you with a receipt that includes its nonprofit tax ID number.
Donating to a nonregistered charity and deducting the gift from your taxes can come with consequences. For instance, you may owe fees and interest when the IRS finds the error. But with a little bit of research, you can avoid paying these penalties.
Don’t forget about volunteering expenses.
Unfortunately, things like volunteer hours and donated labor are not tax-deductible. You can, however, deduct expenses you’ve paid for while volunteering. Maybe you bought supplies or food, or maybe you spent money on printing. Whatever the case, these are all expenses you can deduct. If you find yourself driving a lot while volunteering, then you can also deduct the mileage you’ve driven based on the IRS’s standard mileage rate for charity.
If you choose to deduct expenses like these, it’s a good idea to hang on to the receipts. This can help prove to the IRS that you actually spent what you say you did. It’s also a good idea to keep your personal spending and charitable spending separate.
Do your homework.
Tax deductions are great, but that’s probably not the main reason you give. More than likely you just want to help people out, which makes it important for you to make sure your gift is being put to good use.
Unfortunately, many charities have bloated administrative structures. Things like staff, marketing and overhead expenses might make up the bulk of what the charity spends its funds on, leaving little left over for the charitable cause.
There are resources you can use to make sure your money is being spent the way you want it to. Online sites like Charity Navigator can help you research your charity to see how it spends its money. If your charity doesn’t have a good rating, you may want to look for one that does.
Need help planning your charitable giving this year? Let’s talk about it. Contact us at Ambrose Financial & Insurance Services for more information. We can help you analyze your goals and develop a plan. Let’s connect today.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
16239 – 2016/11/15
