VOL. 129 | NO. 157 | Wednesday, August 13, 2014
Making Philanthropic Dollars Go Extra Mile
By JOHN PHILLIPS
Giving back to the community is a great way to fulfill your life while helping improve the lives of others. Acts of charity are both widely needed and often given, so if you are thinking about donating money, resources or time to a philanthropic cause, there are a few things you should take into consideration.
Why do you want to give? Is there a cause that is important to you? Has a charity helped you in the past? Is it for religious reasons? Answering this question is an important first step in determining where, what and how to manage your philanthropic activities or donations.
Establish a budget. If you have a family, involve them in the process so they understand where the money is going and why. Get your family’s input on where money should be donated. This can be a great bonding experience for everyone.
Do your research. If you’re looking for a tax deduction, make sure that you are giving to a qualified 501(c)(3) organization. Unfortunately, some charities are not as philanthropic as they seem, so it is important to find out where your money is going. There are many organizations in the business of vetting charities and other not-for-profit organizations. One of the most comprehensive is Charity Navigator, but there are plenty of others to check out, including Give Well, the American Institute of Philanthropy and Great Nonprofits. Use these tools to make sure your dollars go where they are supposed to go.
Keep track. Keep track of your donations, regardless of the amount. To deduct a contribution of cash, check or another monetary gift, you must maintain a bank record, payroll deduction records or written communication from the organization containing the name of the organization, the date of the contribution and the amount of the contribution. Be thorough in your recordkeeping.
Avoid an audit. Be aware – itemizing charitable donations can lead to an IRS audit. To avoid problems with your legitimate donations, keep records showing proof of any donation worth more than $250. Non-cash donations, especially those worth more than $500, could draw attention because the IRS wants to make sure that donations are not just worthless items you would throw away otherwise. If you donate an item worth more than $5,000 make sure you get an appraisal because it is likely that the IRS will look at it.
Regardless of which charity you decide to give to or how much you budget to give, the act of helping others can create an improved sense of well-being. Have more questions about your giving? Consult a trusted financial adviser to help develop your philanthropic plan.
John Phillips is the chief investment officer at Red Door Wealth Management in Memphis.