This article is part two in a four-part blog series focused on charitable giving and will address the question: Which charitable organizations should you donate to?
Once you’ve decided how much money to give to charity each year, you can focus on the recipients. According to Giving USA Foundation, the types of charities that tend to receive the most donations are:
- Religious organizations
- Educational institutions
- Human services such as food banks, disaster relief organizations, and homeless shelters
- Health-related charities such as hospitals and medical research centers
- Arts and culture charities such as museums, orchestras, or theatre groups
Many people tend to respond to end-of-year donation solicitations they receive by email or mail and give to the same organizations every year. But if you want to be more proactive about your giving, spend some time thinking about the issues or causes you care about and find the organizations that impact those issues or causes most.
Smaller organizations may have a greater need for your dollars than larger organizations. As such, you may want to take advantage of opportunities to give to local organizations, such as theatre or educational groups.
For example, I donate to a local organization called Foodwise, whose mission is “to grow thriving communities through the power and joy of local food.” Not only do I admire their mission, but I was also previously a board member and get a lot of pleasure from attending their events.
Another example is a client of mine who donates to a swim club she belongs to that’s organized as a 501(c)(3) organization. The swim club was renovating its clubhouse, so she donated dollars specifically to help get this project completed. Another client gives to a hiking club because she’s an avid hiker.
A Word About 501(c)(3) Organizations When Deciding Which Charitable Organizations to Donate To
Suppose you’re eligible for tax deductions for charitable giving. (Ordinally, you must itemize deductions on Schedule A of your Federal Tax return to receive a tax benefit.) In that case, you should ensure that the organization you donate to is a 501(c)(3) organization.
A 501(c)(3) organization is a tax-exempt nonprofit in the U.S. that must operate exclusively for religious, charitable, scientific, literary, or educational purposes. It addition, the organization must not engage in political or lobbying activities or provide private benefits to any individual or group.
It’s also important to note that if you contribute money through crowdfunding platforms such as GoFundMe, Kickstarter, or Indiegogo, these donations are typically not tax deductible. That’s because the individual fundraising campaigns aren’t tax-exempt organizations.
Investigating the Charitable Organizations You Donate To
There are several ways to investigate charities to ensure they’re using your charitable donations properly.
One well known charity evaluation organization is Charity Navigator, which provides ratings and financial information on thousands of nonprofits and assigns a rating based on their performance.
Another is GuideStar, which allows you to search for nonprofits by location, mission, or types of work.
How Many Organizations Should You Donate To?
Lastly, many clients ask me if it’s better to give a large amount of money to one organization or spread their donations among several organizations. I’ve found that this is a personal decision.
Some people care about so many things that they want to spread their money widely. Meanwhile, others prefer to have a more significant impact on just a couple of organizations.
One thing I know for sure: try and give at times other than just the end of the year. The charities will appreciate it, plus you won’t get that anxious feeling that you haven’t done enough on December 31. In addition, if you write checks or take advantage of Qualified Charitable Distributions (QCDs), you’re more likely to meet the deadline to get a tax deduction in the year you donate.
Next: Giving Strategically
The first half of this blog series has focused on how much to give and which organizations to donate to. In part three, we’re going to explore various ways to give strategically, so you can make more of an impact with your donations while enjoying the associated tax benefits.
In the meantime, please visit our resources page for additional details on this topic, and stay tuned for more.