Christmas is a time for giving. We celebrate and spread joy within our families by giving gifts, but also by giving to others. In fact, CharityNavigator.org predicts that at least $100 billion from individual donors will pour into charitable organizations over this holiday season. Most charities receive a large percentage of their total yearly donations during this time, and count on those donations to continue providing goods and services to the less fortunate.
At Lindsey & Lindsey Wealth Management, we encourage our clients to consider charitable giving as part of a healthy financial plan. Giving back, after all, is an important way to show our gratitude for what we have, strengthen our communities, and help those who are less fortunate. With this in mind, I've compiled some valuable information about how to make the most of your charitable giving this holiday season.
What Charities Need
Many people give used toys, clothes, books, furniture, and household items to charitable organizations such as Goodwill or Red Cross. Some of these charities give these items directly to people in need and others place them in thrift shops, where money from the sale goes to the charity sponsoring the shop. If you plan on giving in this way, an article in the Washington Post provides several valuable tips that charities want donors to know.
Clothing and linens that are dirty create more problems than they solve. Wash or dry clean before donating them. If you donate a car, give it the best wash possible beforehand.
If you give food items, make sure the packaging has not been opened.
If you are donating many items, call the charity in advance and make an appointment. This will help speed you through the process as the charity expects you and is ready to process your donation.
When you volunteer to donate your time, you give a gift that is nearly priceless -- although you cannot claim a tax exemption. Make sure you RSVP with the charity, and if you say you will be there, arrive as scheduled. If you decline or do not answer, do not go to the event.
How to Maximize Your Giving
CharityNavigator.org is a fantastic resource when it comes to charitable giving. Their mission is to provide unbiased ratings of charitable organizations so that donors have access to transparent information reflecting the effectiveness of their donation. In order to maximize the impact of your donation of time, money, or goods, it's important to research the organization you give to, with a few major questions in mind:
- What percentage of my donation reaches those in need (as opposed to funding operating costs)?
- Does the organization dedicate money and staff time in a manner consistent with their advertised goals?
- What results has the charity achieved with previous donations? Is there transparency regarding progress towards their stated goals?
The Tax Benefits of Giving
Besides the gratification that comes from giving back to your community and sharing your resources with the less fortunate, charitable giving also benefits you at tax time. The rules surrounding itemized deductions for charitable giving can be complicated, so I've simplified the most important things to remember below.
- To qualify for a tax deduction, the charity must have a 501(c)(3) designation. To be sure that the charities you donate qualify for a deduction, check the IRS website. If you donate to an International charity that is registered in the United States, your donation is eligible for a tax deduction.
- To claim a charitable deduction you must use form 1040A and itemize your deductions on Schedule A. Also, if your donated goods have a fair market value of more than $500, complete Form 8283.
- Contributions are deductible in the year they are made. Thus, donations charged to a credit card before the end of 2013 count for 2013. This is true even if the credit card bill isn't paid until 2014. Also, checks count for 2013 as long as they are mailed in 2013.
When giving cash, checks, or other monetary gifts, get a receipt from the charity that includes their name, the date of the contribution, and the amount. Cash that you drop into a checkout counter donation box is not deductible.
- When donating property, remember it is the fair market value that counts towards the deduction. Software that calculates the fair market value of your property includes: CharityDeductions.com, and iDonatedIt -- a great app for your iPhone or iPad that allows you to track non-cash donations, calculate the fair market value of your donations, and keep everything organized for tax time.
Charitable Giving Boosts Us Up
As I explored in a previous post, charitable giving is good for the soul, good for our communities, and can be good for our pocketbook too. As a man of faith, I am called to help the less fortunate and build my community in a positive direction. As a financial advisor, I encourage charitable giving because I know it will benefit both the charities and my clients.
As we approach the end of the year and the season of giving, I hope that these tools will help you make the most impact when you give back.
At Lindsey & Lindsey Wealth Management, we love to support the Free Clinic of Simi Valley, which provides medical care, counseling, dental, and legal assistance to individuals and families in need, regardless of their ability to pay. Tweet us @Lindsey2Wealth to share your favorite charitable organizations!