The holiday season puts many people in the giving spirit. While you might give primarily to make a difference through the organizations you care about, your charitable donations can also lower your taxes.
“People are motivated from the heart, but the tax advantage that comes with giving is a factor, too,” says Sandra Minutti, a spokesperson for Charity Navigator. “To make the most of it, you should approach your charitable giving strategically.”
The following steps can help:
1. Do Your Research
First, choose a cause or organization whose mission is important to you. “The biggest mistake people make is that they don’t make sure that the charities they’re giving to are actually doing the work they want to support,” Minutti says. For instance, a nonprofit helping to fight cancer might focus on advocacy or awareness rather than funding research or patient care.
Once you’ve found an appropriate organization, check to ensure that your charitable donation will be tax-deductible. Many churches, schools, hospitals and other non-profits are qualified to receive tax-deductible donations—but that’s not the case for every organization. For example, contributions to foreign charities and foreign government organizations are not deductible. If you’re unsure whether deductions to a particular charity are tax-deductible, you can look it up using the IRS’s Exempt Organizations Select Check tool at www.irs.gov before you donate.
2. Know What You Can Donate
While most people make cash donations, there are plenty of other ways to give. For example, you could donate that old piano that has been sitting in storage to an arts organization. You can even donate a boat or car, a piece of real estate or appreciated securities.
All of these items are tax-deductible, but the rules about how much you can deduct and what paperwork you need vary. Consult the charity and/or your tax professional for information on how to best value and document your gift for tax purposes.
3. Keep a Record
Be sure to ask for a receipt for donations you make. That’s true even if you’re donating low-value items like outgrown clothing to Salvation Army or Goodwill. You can easily keep track of your cash donations if you make them with a credit card or save the canceled checks, Minutti says.
4. Give Safely
This time of year, many charities are clamoring for your attention. But, says Minutti, don’t wait for charities to reach out to you. Often telemarketers and others soliciting donations on behalf of charities keep a significant percentage of your gift for their own gain—meaning little of your money actually reaches the people you’d intended to help. You can make the greatest impact by selecting a charity and reaching out to it directly.
This article is general in nature and does not constitute legal, tax, or investment advice. SunTrust makes no warranties as to accuracy or completeness of this information, does not endorse any non-SunTrust companies, products, or services described here, and takes no liability for your use of this information.