With a global pandemic, record unemployment and natural disasters, it’s fair to say that 2020 has been an unprecedented year. If you’re lucky enough to be in the position to help others, here are a few tips on making charitable donations.
Choose the Right Charities
Probably the most important consideration is where to donate. Consider what causes you’re passionate about and where your money can make the greatest positive impact at this time. Put in the research to find a legitimate charitable organization; preferably one that is recognized by the IRS, to ensure your donations are tax deductible. If you’re not sure where to start, check out impact guides online or see where foundations like the Bill and Melinda Gates Foundation are sending their money.
Claim Tax Deductions
You may be able to deduct charitable donations of up to 50 percent of your adjusted gross income. Claiming tax deductions means lower taxes for you, more help to people who need it, and more motivation to keep giving. The key is to ensure your donations are going to an IRS-recognized nonprofit 501(c)(3) charitable organization. If you’re uncertain, you can search for this information on the IRS website. It’s always good practice to keep a receipt or some form of acknowledgement from the organization you’ve donated to, especially for larger donations over $250 and $500, which may require you to attach donation receipt documents to your tax return.
Be Guided by the CARES Act
Now is a great time for charitable outreach, thanks to a number of new provisions in the CARES Act. This bill was designed to fight against the effects of COVID-19 in a number of ways, and provides new tax incentives for charitable donations. You can now claim tax deductions on more cash donations and non-itemized charitable gifts; and the process for corporate donors has been eased as well. Visit irs.gov for a rundown on the new rules that are ready to support more charitable donations.
Make Alternative Donations
Charitable donations don’t always have to be financial. If you’ve got kids outgrowing their clothes and toys, check for local organizations that can help you distribute those items to families in need. Many charities also accept used household goods, books, canned food and so on. Donations like these can also be itemized and claimed as a tax deduction, assuming you’ve donated to an IRS-recognized nonprofit organization.
Look Into a Stock Donation
Another option is to donate appreciated stock. This has the benefit of not only helping others, but also avoiding the capital gains taxes that come with selling appreciated stock. We suggest speaking with a certified financial advisor to understand more about how this works and to see if a charitable donation of stock would make sense for you and your portfolio.
Donate as a Family
Taking charitable action is a great way for families to talk about what’s happening in the world with their kids and help to make a difference together. You might volunteer as a family, or ask kids to personally select some of their unused toys to donate. The conversation about charitable donations can go hand-in-hand with other age-appropriate financial conversations about spending and saving money, and budgeting. If your family puts charitable donations into the family budget, share that information with your kids and let them have some say in what kind of charities the funds are donated to.
Take Your Time
It’s easy to get swept up in the emotional experience of learning about a problem, but be wary of making donations on the fly. It’s always worth it to take some time, investigate the situation, and find the best way to offer support. This is especially true if you’re being proactively approached by a charity representative asking for cash. Always do your research and make sure the organization you’re supporting is legitimate and that the majority of funds get to the people who need help the most.
Find More Ways to Help
If you’re not financially able to donate at this moment, or if you want to take more action alongside your monetary donations, consider becoming a volunteer. There are many ways to help your local community or beyond – check out a website like volunteermatch.org to get started. Depending on your skills and experience, you may be able to do remote data entry for an animal shelter, pack and deliver meals for senior citizens, or tutor low-income students online. Volunteering is also a great way to learn more about local charities in your area, so that when you are able to make a donation, you know where to give.