Jan 16, 2019
Non-Profit Organizations and Charities: What You Need to Know
Here’s what you need to know about giving to a good cause.
The saying goes that charity begins at home. And there’s no time like the present to think of giving to others, which you can do by giving to a public charity.
Charities support important causes, and giving to one—either for yourself or for someone else—can make a big difference in another person’s life, whether it’s assistance recovering from a natural disaster, helping to feed the hungry, or providing education to someone in underprivileged circumstances.
Here’s everything you need to know about giving to a good cause:
What’s a charity?
There are more than a million public charities in the U.S.
Charities are non-profit organizations that have tax-exempt status. That means they don’t operate to make a profit, and they typically don’t pay state or federal taxes. They also must have an active fundraising program, and are involved in some purpose furthering the public interest or the common good.
Generally speaking, there are public charities and private foundations. The key difference is that the general public supports and funds public charities, whereas one person or a family, or some other group of people, controls and funds a private foundation.
When most people think about charities, they are thinking of public charities. But private foundations can also be involved in giving (The Bill & Melinda Gates Foundation is one example).
Examples, according to the Internal Revenue Service (IRS), can also include places of worship, medical research organizations, colleges and universities, some fraternal societies and even non-profit cemeteries (yes, that’s a thing).
Donations could save you money
Let’s talk a little more about taxes.
If you give to a qualified charity, the value of your donation might be tax-deductible. That means what you give can reduce your total income tax.
You might have to itemize your expenses, however, to qualify for charitable deductions.
Depending on the charity, you can give cash as well as non-cash items such as household goods, clothing, even used cars.
Always check and make sure that your gifts are tax-deductible. Many times they aren’t.
Tips for giving to non-profit organizations and charities
Give to qualified charities. These are charities that have been granted tax-deductible status by the IRS, which means you can also get a deduction for your giving.
Special note: The IRS sets charitable donation deduction limits based on adjusted gross income. This information should not be construed as tax advice. It’s always best to consult a tax expert for anything related to your taxes, such as charitable giving.
Keep proper documentation of your donations. For cash gifts, that means a canceled check, credit card statement, or a bank statement.
Get a receipt. If you’re giving non-cash items, you’ll need a receipt from the charity you’ve given to, listing the value of the goods you’ve donated. (If they are used items, you’ll need to list the fair market value, which is what you might get if you try to sell them.) If those goods are worth more than $500, you’ll also need to fill out separate IRS form called the 8283, which itemizes what you’ve donated.
Don’t give blindly on social media. Be wary of GoFundMe or other crowdfunding campaigns. It’s easy to get caught up in the heat of the moment, particularly when there is so much going on in the world around us, and scammers love to prey on these emotions.
Check out the Federal Trade Commission (FTC) for more information on charity scams.
Crowdfunding donations are also typically considered personal gifts by the IRS, and are not tax-deductible, unless the money is going to a qualified charity.
Numerous sites rate qualified charities.
Make sure you’re choosing a charity where the majority of your donation will reach the intended recipients, and won’t be eaten up by the administrative costs of the organization, or other expenses, which can sometimes happen.
Charity Navigator ranks more than 9,000 qualified charities for financial transparency, and compiles lists of the top ten in different categories, such as the ones that are most popular, or the ones with the most expenses.
Charity Watch and Guidestar are two others that provide charity rankings. Another is GiveWell, which focuses less on financial data, and more on the results the charities have for their particular causes.
So whether it’s the famine in Yemen, malaria in Africa, or supporting good causes in your neighborhood, there’s a charity for you.
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*This information is for educational purpose only and should be relied upon as Investment, Legal or Tax advice. and if If you have questions regarding your personal circumstances and the forms that you have received, you should consult a tax or legal professional.
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