Tips for Giving to Charity

It’s getting close to the end of the year, so you are probably considering donating to charity. Here are some quick tips for giving to charity.

Check your charity’s financials. All nonprofit organizations, except for churches, are required to file basic financial forms with the government. The two data points I always look at are executive compensation and percentage of expenses that go to programs. You can find this data for free on GuideStar, which stores Form 990s for all major charities. Charity Navigator also rates charities according to their own criteria.

Donate appreciated investments. If you plan on donating money, consider donating appreciated investments in taxable accounts instead. If you donate investments such as stocks, mutual funds, and ETFs, you avoid paying capital gains tax on the donated shares. Further, your income tax deduction will be based on the full market value of the donation, not the cost basis.

Get a match from your employer. Many corporations run a donation matching program for their employees. It’s free money for the charity, so make sure you fill out the appropriate forms.

Use donor-advised funds to get the tax benefits today and give to the charity later. Since donor-advised funds are technically nonprofit organizations, you qualify for tax benefits when you make the contribution. They will hold and invest the donation for you until you are ready to give to a charity. Most major brokers run a donor-advised fund, so check with each program for fees and restrictions: Vanguard, Fidelity, and Schwab.

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