Important Things to Remember before Making Charitable Donations

Stack of cash with red bow on white backgroundThe holiday season is a time of giving, and many individuals choose to make large, frequent donations to various charities at this time of year. From making cash contributions to donating used and new toys alike, giving back is a common holiday tradition. However, it’s still important to do your research and check up on a few things before you make your donations. Here are a few things to remember when giving to charities this holiday season.

Always Research Charities You Don’t Know

Some people give to the same charities every year. If you’re one of these people, you’re likely very familiar with the organization, their cause, and how your funds are used to further that cause. However, if you’re considering donating to a new charity this year, it’s important that you always do your research.

There are scams out there that are designed to take advantage of people’s charitable attitudes during the holiday season. Scammers will claim to be from a charity and will ask for donations, and their calls or mailers can often seem legitimate. They may even have a professional-looking website set up to lend them further credibility. However, here are a few red flags that indicate a so-called charity is really just a scam:

  • They can’t give you specifics about how your funds will be used. They’ll provide vague statements like, “Your donation goes towards helping families who can’t afford cancer treatment," but they can’t offer you more details.
  • They call during odd hours, or use a prerecorded message to reach you. Charities must follow specific rules when reaching out to people and asking for donations. Those rules include not using robocalls and not calling before 8 am or after 9 pm. If you’re getting calls outside of these hours, or you’re being asked for a donation by a recorded message, it’s not a legitimate charity.
  • They ask you to donate using odd methods, such as wire transfers or gift cards. Scammers ask for payments in these ways because the money is much harder to track.

The bottom line here is that you should thoroughly research the charity, looking for any hint that might indicate they’re just going to take your money and run. If anything seems off, find another organization to donate to.

Find Out If Your Donation Is Tax Deductible

If you’re making a large donation to a charity, ask if your donation will be tax deductible. You can also double-check that they’re a registered tax-exempt organization on the IRS’s Tax Exempt Organization Search. This is important for two reasons:

  1. Fake charities won’t be registered with the IRS. While there are many legitimate charities that aren’t tax-exempt organizations, donating to charities listed on the IRS’s registry can give you the peace of mind that your money is going to a legitimate cause.
  2. Getting a tax deduction for your donation is instant karma! A cause you care about will receive the funds to continue doing the work they do, and you’ll get a reduction in your taxable income when you file your return.

Please be aware that donations made to individuals or on crowdfunding sites like GoFundMe are not tax deductible. While there are many good causes on these sites, there are also many fraudsters looking to profit from other people’s generosity. Be wary of donating to GoFundMe campaigns, and know that you cannot deduct those donations on your tax return.

Keep a Clear Record

If you do intend to deduct your charitable contributions on your tax return, it’s a good idea to get the receipts and records upfront, rather than trying to track them down later on. Whether you’re donating cash, stocks, or physical goods, you should request a receipt from the charity you’re donating to. They typically have these readily available, and can write one up for you in a few minutes.

While receipts for stocks and cash donations are usually quite simple in terms of their value, physical goods can be a bit more complicated. If you’re donating new or used items, you can write down the estimated value of those items and include them with the receipt provided to you by the charity.

It is important to keep in mind that any charitable contribution you claim should be supported by documentation. If you don’t have supporting documents and you’re selected for an IRS audit, any unsupported deductions will be removed from your tax return, and you may end up owing more in taxes as a result.

If you have any questions regarding the deductibility of your charitable contributions, contact Demian & Company CPAs today.