Tips To Donate To Charity

    Published: 06-16-2009
    Views: 11,366
    Financial advisor Ric Edelman provides his top tips for donating to a charity.

    Ric Edelman: More than one million charities are ready to accept your money, make sure your gift will be used as you expect. Do some research before donating, not all charities are created equal. Many so called charities have impressive sounding names, but many of them don't really do much good. So look into the charities mission and find out how your gift will be used.

    You want to make sure that at least 75% of your donation will be spent on providing services. If most of the money is going towards fund raising or administrative expenses, you are probably better off giving your money to another group.

    You should also find out whether your gift will be tax deductable. Gifts to many tax exempt organizations like hospitals and political groups are not tax deductable. It's easy to check them out, go to charitynavigator.

    org, give.

    org or guidestar.

    org.

    Did you know that you can get a tax deduction for giving a charity? Just make sure you follow these eight, yeah eight IRS rules. First, get a receipt. No receipt, no deduction. Second, know the limit on cash gifts. You can donate as much cash as you like but there is a deduction that's limited to 20-50% of your adjusted gross income, anything over that you can deduct in the feature five years.

    Third, know the rules for noncash donations. When you donate property, things like used cars or clothes, your deduction is based on the item's fair market value. That's the price somebody else would pay for the item at a used clothing store or a used car lot. It's probably a lot less than what you paid for the item.

    Clothing and household items like furniture, electronics, appliances they must all be in good condition and forth know the rules for appraisals. If you donate something that's worth $5,000 or more, you need an appraisal. Some charities will pay for appraisals, but find out before you donate the money to them.

    And fifth, understand what qualifies as a non-profit organization. Schools and religious institutions usually do count. Many hospitals will do not and political organizations never count.

    Sixth, you can't deduct your gift if you get something in return. If you buy a ticket to a performance or receive professional services or if you buy a lottery ticket or a raffle ticket, you cannot deduct them.

    Seventh, know the deadlines. You can deduct your donation in the year you mail the check or the year you charge it to a credit card. You cannot deduct a pledge though until you actually donate the money.

    And finally, file the paper work. If your total charitable contributions for the year are over $500, you must file form 8283 with your tax return.

    There are other ways to support charities that give you tax deductions and extra income right now from the assets you donate. Here are three ideas. First is a Donor Advised Fund. With a Donor Advised Fund you donate cash, stocks, bonds, other securities to a managed fund specifically setup for this purpose. Unlike most professionally managed funds these are designated as charitable organizations and that gives you a tax deduction.

    Another option is a Charitable Gift Annuity. With a Charitable Gift Annuity you donate assets to a single charity. The assets become the property of the charity and in exchange, you receive monthly income for life. When you die the charity gets to keep whatever is left. Part of your donation is tax deductable and part of the income you get is tax free.

    One final option is a charitable remainder trust. You establish a trust and you name a charity as the beneficiary. You then fund the trust by giving it some of your assets like stocks or bonds or real estate and you get a tax deduction for doing that. The trust then pays you income every year, at least 5% of the amount you donated.

    If these ideas sound intriguing, talk to a professional advisor. Tax law is complicated and each of these ideas involves a lot of fine print. And if you've already given to charity or if you have donated your time, you have my deep thanks and the deep appreciation for the charities you support and the people and communities they serve. And if you haven't been able to donate then make a promise that you will, soon.