Want to get into the holiday spirit of generosity and make a charitable donation, but just don’t know where to start? With more than 1.5 million non-profits registered in the U.S., you might be swimming in a sea of indecision. We’ll walk you through how to decide on which charities to donate to, tips on receiving a tax deduction and how to make the greatest impact with your contributions.
Review the Charities
With the swarth of charities in existence, how can you go about deciding which ones to donate to? Besides pinpointing by the type of causes that speak most to you, you’ll want to check on how efficient and responsible charities are with your donations.
Charity watchdogs such as Charity Navigator and CharityWatch rate non-profits based on different criteria, such as transparency and fiscal responsibility. In a nutshell, they help you determine how efficiently your donations are being used.
Consider Creating a Campaign on Facebook Fundraiser
Facebook Fundraiser makes it easy to donate on behalf of a charity. You can rally the support of your FB friends to raise funds for a notable cause. The best part? Facebook doesn’t collect any fees, so 100% of the money earned go directly to the organization.
To qualify, a charity must be a registered 501(c)(3) organization, be registered with the IRS, have a tax ID and have a bank account with a licensed financial services institution. If the charity you have in mind meet these criteria, with a couple of clicks, you can create a fundraising campaign.
Consider Making Donations to People on Your Gift List
Kill two birds with one stone by making an end-of-year donation on behalf of someone on your gift list. You’ll both enjoy feel-good vibes. Plus, it’ll prevent you from going overboard and spending more than you anticipated – not to mention gifting something they won’t end up returning.
Make a Contribution Through a Donor-Advised Fund
If you want to cut down on the junk mail and get a tax deduction, then consider making a donation through a donor-advised fund. You can donate cash, stocks or some other asset into the fund and receive a tax receipt. And while you’re busy deciding, the money in your fund could grow tax-free over time. So, that equates to even more cash to give back to worthy causes.
Because these charities have already been vetted, you can rest assured that you’ll receive a tax deduction. Plus, because you are making donations through the fund, you won’t receive junk mail from charities you’ve donated to.
Some popular donor-advised funds include Fidelity Charitable, Vanguard Charitable and Schwab Charitable. Note that most of these require a hefty initial minimum donation to open an account. For instance, it’s $25,000 for Vanguard Charitable, and $5,000 for Schwab Charitable and Fidelity Charitable. You’ll also want to factor in fees, such as administrative and investment fees. If making charitable donations remain a top priority for you, and you can afford the minimum donations and fees, then a donor-advised fund may be worth considering.
Bunch Up Your Donations
If you’re trying to get a tax break to reach your threshold to qualify to take the itemized deduction, consider making two years’ worth of donations in a single year. If donating $3,000 this year and skipping the following year will make you eligible to take the itemized deduction, then it might be worth your while. Of course, you’ll need to be able to afford to do so. Otherwise, it could hurt your pocketbook.
Check for Tax-Deductible Status
Want to receive a bit of a tax break? Remember: You’ll only be able to deduct charitable contributions as itemized deductions. Due to the 2017 Tax Cuts and Jobs Act, the new standard deductions in 2018 are $12,000 for individual filers and $24,000 for married couples who file jointly. So, if you want to get a tax break for your charitable gifts, you’ll need to surpass the threshold for standard deductions.
In the case you qualify for the itemized deduction, how much of a break can you expect? For charitable giving you can deduct up to 60 percent of your gross adjusted income for cash gifts. However, for any amount beyond that, you can spread out the tax benefits for up to five years.
You can check which organizations are eligible to receive tax-deductible charitable contributions on the IRS Tax Exemption Search database. Don’t forget to hold on to your receipts. You’ll need proof of donation when tax time rolls around.
By doing a bit of research and planning, you can make sure each dollar you spend on charitable contributions is used efficiently. Plus, you can potentially get a tax break. What better way to end the year than by doing something that helps others, and can benefit your money situation? It’s certainly a win-win situation.
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