For many, the end-of-year holiday season is a popular time to make a charitable donation. While giving to charity may seem as simple as opening up your wallet or filling out a check, it's worth giving this particular gift a little extra thought.
As Kiplinger pointed out, "scammers can be especially active during this season, looking to take advantage of those with the best intentions." Plus, by being strategic about your gifting, you can reap some potential tax benefits, open up more funds for future giving, and maximize the impact of the donations you make this year.
1. Research before you give
Before you make a donation, take some time to vet the charities you're considering giving to — after all, you want to ensure your funds are actually going to a good cause. A great place to start your investigation is "by doing some basic research using sites like Candid or Charity Navigator, as well as reading materials on the nonprofits' websites," according to Fidelity. Look for documented results as well as details on future plans and where else funding comes from.
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Another way to research is by volunteering before you donate, which, according to Real Simple, can "give you a sense of an organization's ethos." This might be especially easy to do if you're planning to donate to local charities. Plus, "donating locally is key to ensuring you have a direct impact in your community," Angela Ruth, co-founder of Due, told Kiplinger.
2. Make sure to get a receipt
If you want to claim your charitable contributions on your taxes, you'll need to get some proof. According to Investopedia, "for smaller cash donations you only need a bank record or a simple receipt from the charity," but for a cash donation of $250 or more, you'll need "a 'contemporaneous written acknowledgment' (as defined by the IRS) of the gift from the organization."
3. Consider donating something other than money
Money isn't the only thing you can give to charity — you can also donate stocks and bonds. Donating "appreciated assets" like stocks and bonds is actually more efficient than cash from an income tax perspective, according to TIAA, because when you "gift an appreciated security to a charity, you, and the charity, avoid the capital gains tax."
Those who are age 70 1/2 or older have another option when it comes to tax-efficient giving: qualified charitable deductions (QCDs). According to CNBC, you can donate "up to $100,000 per year from your pre-tax IRA," and doing so also "can satisfy your required minimum distributions." Further, you'll "avoid paying income taxes on the amount you donate" as that money "never goes into your own pocket," explained The Wall Street Journal.
4. Take advantage of corporate matching
If it's available to you, make sure to take advantage of corporate matching.
"Many employers offer great benefits for charitable giving, such as matching gift programs — where they match your donations to charities — or incentives for volunteering," says Fidelity. To find out what's offered, consider perusing your benefits page before you make a donation.
As Marguerita Cheng, founder & CEO of Blue Ocean Global Wealth, told Kiplinger, doing so can make a big difference: "[M]y gift of $333.33 was doubled twice. My employer doubled my gift because I volunteered more than 20 hours in the year."
5. Make giving a group activity
Another way to boost the impact of your charitable gift is by combining it with the resources of other people in your circle. "Participating in a giving circle — where multiple people pool their resources to provide nonprofits with support — is a great way to make a larger impact than you could individually," explained Fidelity. You might even consider making this a new family tradition, where you have "all family members commit to supporting a common charity through donations or volunteering."
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