We’re in the last quarter of 2013 meaning that now is the time to begin thinking about year-end planning and the charitable giving and tax planning strategies it may involve. Contributions that are made on or before December 31st will be considered deductible for this year if you itemize your deductions and they exceed the 2013 standard deduction of $6,100 for Single filers and $12,200 for Married Filing Jointly. Below are four things to keep in mind before you begin writing checks and answering requests for donations from various needs and causes:
Reflect on your values
Identify causes that are most important to you and your family and are aligned with your values. Has your family been affected by a health issue such as breast cancer, heart disease or diabetes? Are you passionate about education, animal rights or keeping our environment clean?
By narrowing down your cause or causes before you begin writing checks, you’ll be able to be more impactful and likely to make a change with those issues that are closest to your heart and minimize the amount of requests for donations that you receive on an annual basis.
Do your research
Before donating to a specific non-profit, take time to check them out using a website such as Charity Navigator, which rates non-profits based upon their financial health, their accountability and transparency and their results reporting. Pay attention to the amount of money they spend on the programs and services with which they’re trying to affect change versus fundraising and administrative fees.
In addition, ensure that the organization you choose is a 501(c)(3) organization, which means its granted tax-exempt status under the Internal Revenue Code.
Whether you’re contributing money or property, it’s best to always have a bank record or written receipt from the charity showing it’s name, the date and amount of contribution (this is required for monetary donations of $250 or more). Bank records include cancelled checks and bank or credit card statements.
If you’re donating property, try to have a reasonable list and description of the items donated. This IRS offers additional tips for year-end giving if you need further direction.
Consider alternate strategies
If you’re unsure of where you’d like to donate, but know that you’d like to take advantage of the tax benefits of making a charitable donation, consider opening and contributing to a Donor Advised Fund. A Donor Advised Fund is a smart and simple way to gift funds. Typically requiring an amount of $5,000 or more to fund, you can contribute to it whenever you have the money to do so and obtain a tax deduction in that year. You can give the money away immediately, or you can let it stay in the account, invest it, and give it away at some time in the future.
Donor Advised Funds serve as a vehicle in which you can directly donate appreciated stocks and mutual funds to, while allowing you time to conduct research and track amounts and organizations which you choose to give to.