August 24, 2007, Newsletter Issue #76: Donation Due Diligence

Tip of the Week

Not all charities soliciting for good causes are eligible to receive tax-deductible contributions. "Tax exempt" means the organization does not have to pay taxes. "Tax deductible" means you as a donor can deduct contributions to the charity on your federal income tax returns. In the United States, organizations designated by the IRS as a 501(c)(3) organizations are both tax exempt and can receive tax-deductible contributions.

Generally, humanitarian, religious, medical, and educational organizations qualify, while political organizations and other nonprofits do not. Be sure to ask for charity's tax exempt letter, which should specify whether they can accept tax-deductible contributions.

*Refer to IRS publication 78 for a listing of current 501(c)(3) registered nonprofit organizations. Note that this only matters if you want the tax deduction: not having a 501(c)(3) status does not mean that the organization is not promoting a good cause. Just be informed, so that you make the decision and the donation that is right for you.

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