More than 1.5 million nonprofit organizations, from public charities and private foundations to fraternal organizations and civic leagues, are registered in the U.S., according to GrantSpace.org. Among those thousands of philanthropies, a discerning donor may lack the resources to determine if their charity of choice is deserving of a donation. Use the following as a guide for making your next contribution.
Donors can depend on intelligent giving guide Charity Navigator for assessments and ratings on more than 6,000 charities. LifeLock, an identity theft protection service, supports safe online donations and promoted Charity Navigator, “the nation’s largest and most-utilized evaluator of charities” on Twitter. Charity Navigator ensures intelligent giving and good governance by using its rating system to analyze a charity performance based on its areas of financial health, accountability and transparency, as LifeLock emphasizes. Visit CharityNavigator.org to search a charity in its directory. Charitable givers and social investors can also find trending philanthropic topics and donation tips on the site.
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When you donate to a charity, you may not have a clear idea on how much of your dollars support the issue or pay for general administration costs. As a good rule of thumb, more than 60 percent of a donation should go to the program services (or the actual cause) that you’re supporting, recommends CharityWatch, also known as the American Institute of Philanthropy (AIP). CharityWatch, a self-described nonprofit charity watchdog and information services, adds that it’s reasonable to expect that less than 40 percent of your donation will be spent on expenses that aren’t directly program services, such as administration.
Although top-efficient charities should be able to use 75 percent of a donation on the program, keep in mind that newer organizations or growing groups devoted to less popular issues may need to spend a higher percentage on other expenses while still establishing itself.
Taxes & Registration
Avoid paying cash and request a receipt or printed copy of the donation to use as a record for tax purposes. The IRS requires a receipt from a charity for donations of $250 or more to be tax-deductible. For donations less than $250, a bank record, cancelled check or written receipt or letter from the charity can serve as records of contributions. Make sure receipts from a charity include the organization’s name, as well as the date and amount of the donation, notes CharityWatch. Also, check with the charity to make sure that you’re donations will be tax-deductible. A tax-exempt organization means the organization isn’t required to pay taxes. Tax deductible means that you can deduct contributions on your tax return.
You can trust that your funds will be properly used if the philanthropy has local, state or federal registration. Secular charities that earn more than $25,000 a year are required to file financial data with the IRS. Since registered organizations file funds with the government, your donations are likely to be used for the correct fundraising purposes.