Be Thoughtful About Giving Back
Consider having a family giving policy or charitable mission statement and prioritize the causes you wish to support financially.
- Evaluate donations the same way that you analyze investments.
- Look for organizations that use resources efficiently so your donation dollars will have the biggest impact.
- Analyze the percentage of donations to an organization that are used to cover administrative and fundraising expenses.
- The percentage of donations spent on administration and fundraising should be available in a charity’s literature.
- You can visit Charity Navigator at http://www.charitynavigator.org and look up a charity.
- The Better Business Bureau also rates charities.
Keep Track of Donations
Keep track of this year’s donations and the acknowledgments, thank you letters, and emails, in a current year tax file, which makes it easier to recall donations at tax time.
- Note the date, amount, and check number (if you wrote a check) on the solicitation letter or a print out of the email and put it in the file.
- When you receive an acknowledgment, it goes directly in the file.
- The current IRS rule is that you need to provide an official acknowledgement for donations of $250 or more.
- For more information on rules regarding donations, visit http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Charitable-Contributions-Written-Acknowledgments.
Donate Appreciated Securities
If you own stocks or bonds that have increased in value significantly, consider using them for donations.
- Donating appreciated securities allows you to avoid paying capital gains taxes.
- The value of the donation is based on the market value on the date of the gift.
- If you sell the asset and donated the cash, you will have to pay capital gains.
- There are considerations:
- You need to have owned the investment for more than one year to get the full benefit.
- You will need to provide the cost basis for tax returns, so keep good records.
- If you decide to donate securities, choose holdings that have the lowest cost basis relative to the current market value. These securities will provide the biggest tax benefit.
