What are some smart things to do as I plan my charitable giving?

Smart Giving: Pool Your Resources

Donating to charity is not just for the lucky segment of the population with enough money that they have a financial incentive to give it away. Every penny that you give makes a difference to the organization to which you give it. Nevertheless, you might wish you could give a larger gift than you can afford to your charity of choice. Guess what—others may be in exactly the same situation!

Consider organizing a giving group: each member of the group gives what he or she can comfortably give. Total up the funds, and then, as a group, decide which charity or charities you would like to donate the amount. This arrangement could take other forms, too: you could decide you want to organize a group of people interested in giving to a specific organization, and then collect and total the gifts.

Smart Giving: Plan Ahead! Include Donations into Your Budget

Whether you do it at the start of the year or the start of the month, you probably lay out a budget from time to time. As you put aside money for home improvements, vacations, and the unexpected car repair, also include line items for your philanthropic activities. If you know that you give money to your alma mater each year, put that in the budget. If you have a cause that is close to your heart, add that, too.

If you're not sure to which charity you might want to give, or you know that each year brings its share of sad events that require financial relief, just set aside a dollar amount so that you have some cash to send when the time arises.

Smart Giving: Remember That Giving is a Choice

We know it's a good thing to do. We know that there are thousands of worthy causes out there that would really benefit from our gifts. But it's okay to not be able to give to every charity, or to say no sometimes.

Give generously when you can, but if you simply cannot afford to give at a certain time, or if you feel uncomfortable, don't be afraid to say no. If you are put on the spot by a solicitor, feel free to ask for more information and take more time to think before making your decision.

Smart Giving: Avoid Sending Cash

As tempting as it might be to put a $20 bill in the envelope you receive with a solicitation letter, take the time to write a check. Cash gifts are easily lost or stolen and not traceable.

*For security and tax record purposes, it is best to pay by check made payable to the beneficiary. Never make a check payable to a solicitor.

Smart Giving: Know the Facts on Tax

As with anything, there is more to charitable giving and tax deductions than meets the eye. Find out how much of your donation is really tax deductible. Be aware that if you receive a something in exchange for your gift (such as a book, a dinner, or some other 'prize') the amount of your tax deduction is reduced by the fair market value of the premium. For example, if you pay $600 for 2 tickets to the Superbowl (assume face value of $200 each) at a charity auction, you can only receive a tax deduction equal to $200.

*You can always turn down the incentive item if you wish to claim a deduction for the full amount of your gift - ask the receiving organization for more details.

Smart Giving: Shape-Shift Your Gifts

It's not all about writing a check. There can be significant benefits to using alternative forms of giving, such as planned giving (bequests), charitable trusts, gifts in kind, endowments and other creative gift mechanisms.

*Your tax advisor, accountant or attorney can help you make the best plan for you and your family.

Smart Giving: Keep Track

To receive tax benefits when you make a donation, you must keep appropriate documentation. For monetary gifts of less than $250, a cashed check or receipt from the charitable organization is usually sufficient proof of contribution.

When donating property, establishing a trust or an annuity, it's time to call in professional advice—talk to your accountant. Also, many charitable organizations will provide you with support for whatever documentation you need for tax purposes.

Smart Giving: Get the Scoop!

You know the drill: the phone rings and it's your alma mater…or the fire department…or the organization that benefited when you sponsored your friend in the marathon last year. The person on the other end of the line wants to know what you'd like to donate this year. It's probably dinner time, but don't hang up just yet - that's a volunteer on the other end of the line, or at least an employee who has dedicated her career to nonprofit work. However, do not be afraid to ask questions!

Ask solicitors names and her relationships with the organization; if you are not familiar with the organization, ask what its mission is and how your donation will be used. Make your donation only when you feel comfortable that your dollars will be supporting an organization you know, believe in and trust.

Smart Giving: Designate How You Would Like Your Gift to be Used

Nonprofit organizations tend to have annual fundraising campaigns, punctuated every so often with specific fundraising events that raise money for particular causes or purposes. When you give to an annual fund, you are supporting the general operations and activities of a charity. Ask questions about how the money will be used, and what percentage of it will go to salaries, mortgages, and the like, and how much is directed to programs. Depending on the answer, and depending on what you are most interested in funding, you can talk with the charity about earmarking your gift for specific purposes.

Let's say you want to donate money to go to hurricane relief in Florida, designate that on the check, and send a letter with your donation. Such designations can be attached to material donations. For example, if you have more books than you can store, donating them to a library can be a great option. Depending on the library's needs, they might sell those books to raise money with which to buy new books. If you still want to be able to go and read "your" books, however, you can probably talk with the library about designating those books to be retained.

*When making a designated donation like this, it makes a lot of sense to do some legwork and talk with the charity to which you want to donate first. That way, you'll know the best way for you to help.

Smart Giving: You Don't Have to Shout it out Loud

Maybe you're shy, maybe you don't want to end up in a mailing list database, or maybe you have reasons for not wanting to receive any acknowledgment of your gift. Good news: your gift can be confidential.

If you prefer to have your gift remain confidential, you should let the organization know. Charitable organizations value all the donations they receive and will do their utmost to honor your wishes.

Smart Giving: Make Your Gift go Further Through Matching Programs

Want to make your donation double? Ask your employer whether they will match gifts.

Many employers match gifts made by their employees or will make grants to organizations recommended by employees. This is an easy way to direct more funds to the charities of your choice.

Smart Giving: Time Your Gift to Best Tax Advantage

For many people, income can vary from year to year. Tax rates fall and rise in step with income fluctuations. Luckily, income tax savings from donations rise and fall as well. For example, imagine that you know your income will be substantially greater in 2006 than it is in 2005. If your tax rate is 28% in 2005, you expect a tax rate of 39.6% in 2006, your relative tax deduction on a $10,000 would be $2,800 for a gift made on or before December 31, 2005 and $3,960 for a gift made on or after January 1, 2006.

*If you are in the fortunate position to be making large donations and your income varies from year to year, plan to make large donations during the higher income years.

Smart Giving: Don't Wait to be Asked

Donating to charity does not have to be a reaction to a request. You know what is important to you, and you want to make a difference. Create a giving strategy. Think about the kinds of missions you support, and research charities that advance those missions.

Contact charities and discuss what kinds of gifts they most need, and how you can most effectively help make a difference in your community. Taking such a proactive approach will help you feel confident in and proud of the gifts you're giving.

Charity Frequently Asked Questions

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Guru Spotlight
Jolyn Wells-Moran