Making a charitable donation has such a positive impact on the lives of others. It can also make you feel good about giving and be tax deductible. But, as with anything else that involves money, you need to proceed with caution. Here are some steps to assist you with your philanthropic endeavors.
1. Determine a cause you care about: First decide what impact you want to make. Do you want to help children, veterans, animals, missions, etc.?
2. Do your research: Before deciding to give to an organization, do some research on where your money goes.
What percentage of their budget is spent on administrative costs?
Be careful! There are some national, international and even local organizations that have extremely high administrative costs. This means your dollars are going to pay for large executive salaries, plush offices, etc. When you make an informed decision with your philanthropy, you may rest assured the organization you give to is being a good steward of donor funds.
Charitynavigator.org is a great website full of information on charities and their transparency with their funds. Guidestar.org is another website which provides you with information on charities and has a rating system to help you understand which charities are the most transparent with their funds.
How effective is the organization?
The organization may be supporting a cause you care about but are they really making a difference? Review their statistics. Depending on the cause, it’s not all about the numbers. It may be more about their success rate. For example, it’s not only the number of people sheltered, but also how many of those sheltered were able to get off the streets. Furthermore, were they then provided resources to get back on their feet and move from the shelter to their own housing? Most nonprofits will provide you with an annual report to assist you in understanding where your dollars go and how they make an impact. Contact their local office and ask questions about the work they do and how donor dollars are used.
Are they tax deductible*?
To determine if the organization you want to give to is tax deductible, visit the IRS website. Use the Exempt Organizations Select Check tool, which is a search tool that enables you to search for an organization and review information about their federal tax status and filings. Here is the direct link to the tool:
*This article is not intended to provide you with tax advice. Consult with your CPA for any questions regarding your tax deductions and charitable giving.