At the end of the year, thousands of Americans rush to make charitable donations to offset their taxes or help out their favorite causes. According to Senior CFP Board Ambassador Jill Schlesinger, CFP®, too often, Americans may not recognize two keys to smart giving: careful vetting of charities, and tax planning that helps make the most of a gift.
"Considering how many people make charitable gifts at year-end, it's amazing how little thought and research can go into the process," Schlesinger says. "There are fake charities and scam artists who take advantage of generosity."
To combat this, Schlesinger offers the following checklist for Americans who are preparing to make end-of-year donations.
Step 1: Confirm the charity is legitimate
by searching the IRS tool, Exempt Organizations Select Check. Cross-reference by asking the organization for its employee identification number, and then searching the same database for it.
Step 2: Research the charity's financial health.
The Better Business Bureau's (BBB) Wise Giving Alliance, Charity Watch, GuideStar and Charity Navigator offer guidance on how charities spend money. Many Americans want to understand what portion of a donation goes to overhead, versus the cause itself.
Step 3: Determine how to donate.
Options include donations of goods, checks, wire transfers and credit card payments. Americans can also donate appreciated securities and write off the current value of a stock, or make donations directly from their IRAs, though some rules apply.
Step 4: Keep good records.
For any donation valued at $250 or more, the IRS requires a bank record, payroll deduction or written communication identifying the organization, the date and amount of the contribution and a description of the property.
To be deducted from 2017, donations must be given or postmarked by midnight on December 31.
Source: Certified Financial Planner Board of Standards, Inc.
Published with permission from RISMedia.