HOW TO: Donate to Charity

It’s the end of the year, so we thought we’d offer some tips on charitable giving. There are only a few days left to donate items before the end of the year. Giving to charity is about more than just saving on your taxes, it’s also about helping a cause that’s important to you. You could save a panda, or cure a disease, or help someone who is hungry. Giving to charity is a way for you to decide where your money goes.

The question is, how do you know if the charitable institution you’re giving to is worthwhile? Are they putting your money to good use? Also, what should you donate? Cash? Items you no longer need or use? How much can you donate? What documentation do you need for the IRS? Answers inside.

What Should I Donate?

Donating cash is convenient, but donating items you don’t use can be just as easy and there’s the added benefit of getting all that crap out of your basement. If you have items that are in good condition, save them from the landfill and help someone at the same time by donating them to charity. You can deduct the fair market value of all the items you donate.

Who Should I Donate It To?

The American Institute of Philanthropy is a watchdog group that rates charities based on their efficiency. Their goal is is to maximize the effectiveness of every dollar contributed to charity by providing donors with the information they need to make more informed giving decisions. Here are some examples of charitable institutions that received an A+, the highest rating:


Multiple Myeloma Research Institute
Christian Foundation For Children And Aging
The Conservation Fund
American Kidney Fund
Deafness Research Foundation
The American Red Cross
Africare
American Refugee Comittee
Catholic Relief Services
International Medical Corps
National Alliance for Research on Schitzophrenia and Depression
Fisher House
Intrepid Fallen Heroes Fund
Big Brothers, Big Sisters of America
Scholarship America
Cedars Home for Children

How Much Can I Donate?

Donations are limited to 50% of a person or couple’s total earnings for 2006. If you’re thinking of donating stocks and bonds, you’re limited to 30% of your total earnings. Any donations of stocks and bonds must be of items that have increased during the calander year, and will be rated at their value on the day of the donation.

What Documentation Do I Need?

According to Goodwill Industries website, the IRS has tightened the rules for giving, especially when donating used items. Cash donations now require a receipt from the charity, a canceled check, or credit card statement to prove their donation, and you may not claim a deduction if you cannot provide supporting documentation. “For material donations, donors may claim a deduction only for items that are in “good” condition. For items worth more than $500, a qualified appraisal must accompany the claim.”

You might consider taking photographs of the items before you donate them to prove they were in good condition. What does “good” condition mean? “A good rule of thumb to follow when determining the condition of something you want to donate is to consider whether or not you would give it to a relative or a friend,” says George W. Kessinger, President and CEO of Goodwill Industries. “If the answer is yes, then it’s fit to donate and most likely in “good” condition.”

What IRS Resources Are There?

The IRS provides detailed instructions on deducting all types of charitable donations from cars to a pair of jeans that no longer fit your ass.
Publication 526, Charitable Deductions
Publication 561, Determining the Value of Donated Property

What Forms Does The IRS Require?

From irs.gov: “If you claim a deduction on your return of over $500 for all contributed property, you must attach a Form 8283 (PDF), Noncash Charitable Contributions, to your return. If you claim a total deduction of $5,000 or less for all contributed property, you need only complete Section A of Form 8283. If you claim a deduction of more than $5,000 for an item or a group of similar items, you generally need to complete Section B of Form 8283 which requires, in most cases, an appraisal by a qualified appraiser.” —MEGHANN MARCO

Comments

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  1. ADM says:

    this will probably rankle some people, but if you give money to the American Red Cross, you are making a big mistake and not being a responsible donor. They SERIOUSLY botched the 9/11 fund and are still screwing up the Katrina fund.

    Wikipedia on 9/11 fund fiasco:
    http://tinyurl.com/yjpcsf

  2. A previous consumerist post mentions charity navigator, another great site for checking charities:

    http://www.consumerist.com/consumer/taxes/best-charities-f

    All of the charities listed in Meghann’s list are given great ranks on Charity Navigator except for one, the “Deafness Research Foundation” which gets a resounding one star.

    http://www.consumerist.com/consumer/taxes/best-charities-f

    So word up to anyone thinking of donating and looking for a second opinion. The rest of the list looks completely solid.

  3. Er correct link to deafness research foundation (via charity navigator) here: http://www.charitynavigator.org/index.cfm/bay/search.summa

  4. slipnby says:

    I discovered some time ago that donating a used car to a charity does not mean the donated car goes to someone in need of it. The car is often sold as scrap by charities. I’ve learned many charities pay themselves first (administrative fees) then send out what is left over. A reasonable fee is considered to be 15%, but the fee can inflate to 3 or 4 times that depending on definitions. I’ve become skeptical of charities. Salvation Army seems to use the funds for the intended purpose based on what I’ve observed directly.

  5. zipple says:

    There’s a new way to give money to charity that doesn’t cost you a penny: it’s called Gifter, at http://www.gifter.org.

    Internet entrepreneur Austin Hill is asking people to post their wishes online. For every wish, Hill is inviting individuals and businesses to make a donation — which will hopefully add up to $1 million given to charity.

    Organizations benefiting include the Montreal Children’s Hospital Foundation and the Canadian Society for the Prevention of Cruelty to Animals.

    This deal is for real: read more about it at Canada’s national newspaper, The Globe and Mail.

  6. “Who Should I Donate It To?”

    Another good idea is to get involved with a local charity you believe in — you can see how it’s run, see where the money goes, and donate to a cause you’re really committed to!

    I love Habitat for Humanity and the Heifer Project (in particular) for general donating, but the local charity projects I can see and work on are the ones that really get me excited. :)

  7. capturedshadow says:

    Working on the ground for the Tsunami Response there are certain groups I like, judging by their program results. (eye witness biased opinion) CARE, Oxfam, International Rescue Committee, Mercy Corps, and MSF.
    Don’t like the religious charities, but if you must CWS and CRS are OK.

  8. scottso says:

    “Donations are limited to 50% of a person or couple’s total earnings for 2006.”

    Really? Would a charity refuse the money if you donated above and beyond that amount? :)

  9. josh1701 says:

    As a fund-raiser in higher education, just a few thoughts:

    –The best charities to give to are those you have a personal connection to, whether as a graduate, a volunteer, or if you or someone you know has benefited directly from a charity’s services.

    –Gifts of appreciated stock are great. When transferred directly to the charity, you will receive an income tax deduction equal to the fair market value of the stock on the effective date of the gift. In addition, you avoid capital gains tax on the transfer.

    –Don’t forget that many employers will match the gifts of their employees (and spouses). Check with your company’s human resources department, and have your gift doubled or even tripled to the charity of your choice!

    Happy giving!

  10. Meg Marco says:

    josh1701, thanks those are great!

  11. raincoaster says:

    scottso: Donations themselves are not limited to 50%; the deductability of donations from taxable income is what’s limited.

    I donated my old car to charity, and since it was a rusting heap of undrivable scrap metal at the time I’m only glad there was someone who was able to get some money for it. If you have a car that actually runs, why not phone up a local organization and ask if they want it to use? There are plenty of underfunded organizations who could probably fund the insurance, but could never lease a vehicle.