You’re basically in the home stretch of holiday preparations—and it’s not even Thanksgiving yet!
Now that you’ve got thanks and giving on your mind, we’ll show you how to approach your end-of-year giving and tithing.
Giving to our favorite charities is a worthy way to end the year. Not only can buying gifts for a family in need or helping out at a soup kitchen on Thanksgiving day be fun, it can also offer financial benefits.
For most people, it makes sense to give at the end of the year so their money can earn interest throughout the year before they donate it. (More below on when it doesn't make sense to donate at the end of the year.)
However, it's only good for our finances if we stay within our giving budgets. Today we’ll break down how to choose which charities or causes to donate to, how to do so without going in the red and the impact giving will have on your taxes.
Budgeting for Charity
As you consider how much to give, the first thing to remember is that everyone's financial situation is personal. For most people, donations don’t exceed 2% of their total annual income, but decide for yourself whether this works for you. Those who tithe often donate 10% or more, but this is best planned and saved up for during the year.
When determining your budget, go with an amount that you can handle without dipping into your emergency fund or retirement savings. If your giving budget is smaller than you’d like, never fear. There are plenty of ways to get creative and give in non-cash ways—time, services or other in-kind gifts (more on that below).
Choosing Your Causes
1. Pick what's important to you.
When you consider where you might give your money, think about your top priorities. Are you passionate about the environment or saving a particular type of animal? Has something happened in your personal life that inspires you to donate to a particular cause, such as searching for a cancer cure or mentoring a group of at-risk youth? Also, would you rather give to a cause that has a local impact or a global one? If you're looking for a worthy local cause, you can do searches by topic, location or both on sites such as Charity Navigator, Charity Watch and the Charities Review Council.
2. Narrow down the kind of organization.
Consider whether you want to give to a big charity or a small one. At a large organization, your individual contribution might be one of thousands, but the combined impact could effect great change. On the other hand, a small organization may not have a broad impact, but your gift alone could make the difference for one individual or family.
3. Do a search, with your mission in mind.
Keeping those things in mind, conduct your search on the above sites for organizations whose goals align with yours. Then, head to the organizations' individual websites to look at their programs and see if they do work in areas you feel passionate about. Also, pay attention to the holiday giving drives that they launch: Is there an end-of-year match that will double your dollars? Will you receive a nice calendar that will remind you of the organization throughout the year? Do you even see a type of donation that would make a great gift for someone (i.e. adopting one animal of an endangered species)?
4. Cross your Ts.
Make sure that all the charities are proper 501(c)3 organizations, meaning that they are registered with the IRS as tax-exempt organizations. You can find out by searching for the organization in the IRS non-profit charities database, which has the complete list of organizations holding 501(c)3 status. If your chosen charity is not on this list, your contribution won’t be tax-deductible.
5. Get the biggest benefit for your gift.
Lastly—and this is the trickiest thing to gauge overall—try to give to an organization that actually gets the results you seek. You can get a sense of effectiveness through the websites listed above as well as through the Better Business Bureau, all of which rate charities based on factors such as how they spend their budgets, how much they spend to raise funds and how transparent their finances are.
If you still feel you need more information to make a good decision, call the organization itself to find out what they are accomplishing in your area of interest, or if they have special holiday fundraising programs to which you can donate. Doing so will also help you feel sure that their work aligns with your own interests.
How to Give
1. If you’re donating money …
There are two ways you can go: If you’re trying to decide how much to give to each organization, allocate based on your dedication to each cause—i.e. more for causes you care more about—or find out what amount is needed to accomplish one particular task at the organization. For instance, if you want to help a family in a developing country and you see that $50 is the amount needed to help them dig a well, then give them $50. If the local food bank says that $25 could feed a family of four for Thanksgiving, select that amount.
Which are Your Favorite Charities?
Let us know about your favorite worthy causes (shameless plugs accepted!) in LV Discussions.
Be sure to get a matching gift from your company if it offers that as a perk. Company matches are a quick and easy way to increase your impact. Other companies have charities they're affiliated with and encourage employees to donate—some even going as far as only matching gifts to that charity. If your employer falls in this category, consider your priorities and budget, then decide for yourself whether it makes sense for you to go with your employer's chosen cause or on your own.
Lastly, if choosing between sending a check or attending a charity event, opt for the direct donation. As Charity Navigator puts it, "Special events, such as galas and golf outings, are notoriously inefficient ways to raise money for a charity. Not only are these events outright costly (invitations, catering, entertainment and so on), but planning a fancy ball often diverts staff time away from the charity’s mission."
Also, a straight-up donation is better for your taxes. If you itemize your deductions, you’ll be able to deduct the full amount of your donation, whereas, if you were to attend a gala, you wouldn’t get to write off the full amount of your ticket, because the costs associated with the gala ticket (dinner, alcohol, etc.) are not counted as part of your donation.
2. If you’re giving items …
Many organizations are gathering used coats and other warm clothing for the winter, making it a great time for you to pare down your closet and help others by donating items you no longer use. If you're looking for a local organization that can use those goods, use this advanced search on Charity Navigator. For instance, if you plan to get rid of your winter coat, donate it. If you’ve recently bought a new set of kitchenware, donate the old set.
If you’re looking for a way to integrate giving into your life this holiday season, look into the 29 Gifts Challenge, which challenges people to give away something for 29 days. Your gifts can include things such as money, food, old sweaters, smiles, your time, kind words or thoughts. The site then asks you to create something—a story, a song, a video, etc.—that describes your experience with making a commitment to giving. Committing to giving every day of your life for a month will certainly get you in the giving mindset and show you the direct impact of your generosity.
3. If you have extra time …
Call the organization and ask about volunteering opportunities. Certain charities need more volunteers than normal during the holidays—for instance, to help cook and serve the holiday meal, or to gather goods collected from holiday food drives.
Try out a mini-volunteering opportunity like Sparked.com, a microvolunteering site that allows you to give of your time online. On Sparked, non-profits post jobs that they need done on a computer, and if you have ten minutes or a full hour, you can log in and help them with their work. It helps non-profit organizations save the money they would spend on hiring someone to do the job, and helps you give even if you don’t have cash to spare right now.
How to Get a Tax Deduction
You’ll only get a tax deduction if you itemize your taxes. This only makes sense for people whose deductions would be greater than the standard amount, a category that can include property owners, business owners and people with numerous medical expenses. If you're not sure whether it makes sense for you to itemize, consult an accountant or a tax service such as TurboTax. (For 2011, the standard deduction for single taxpayers is $5,800; for married, $11,600; for head of household taxpayers, $8,500. Some groups, such as those 65 and older and the blind, get higher deductions; exact thresholds and amounts can be found here.)
In order to get the deduction for your 2011 taxes, you must donate the money on or before December 31st. However, if you are buying property and your accountant expects that you will itemize your deductions next year, then it may make sense for you to wait 'til January to donate. That way, you will receive the full tax benefit of your gift and, as long as your charity's fiscal year does not end December 31, the gift will still fall within their tax year.
If your donation is less than $250, you only need a bank record or receipt; if it’s more, the organization must provide a written confirmation. If you donate stock or anything else beside cash, the deductible amount is fair market value of the property.
While it's important to be financially smart about how you give, in the end, it's not about your tax deduction, or about what you get back from giving to others. It's about getting into the spirit of giving, and making sure you create room for it in your life. If you're not able to give as much money as you'd like this year, make a New Year's resolution to spend and save better so you can grow in both prosperity and generosity next year.
For More on Charitable Giving:
If your budget is a little too tight for giving this year, look into ways you can give to charity without spending a dime.
To get the younger members of your family involved in giving, check out how to make charity fun for kids.
When isn't charity ... charitable?