Money News

Make your donations count

2020 was a record-breaking year for charitable donations in the US, with 34.8 million people giving an estimated $2.47 billion on Giving Tuesday in December, a 25% increase over that same day in 2019.

The need for generosity continues into 2021, as the coronavirus pandemic, unemployment, food insecurity, racial injustice, and other hardships make the work of nonprofit organizations more important than ever. And if you donate, your contribution not only helps a good cause, but also rewards you with the gift of a tax deduction.

Here are ways to maximize the impact of your charitable giving — both for you and the causes you support.

• Decide where to donate – Think about issues that are important to you and identify charities that address those needs. Websites like Charity Navigator can help you research nonprofits. Simply browse charities by category or search for individual organizations. In addition to basic information about the charity, you’ll see a rating based on financial health, accountability, and transparency.
• Confirm the charity’s nonprofit status – Only contributions to tax-exempt organizations are eligible for tax-deductible charitable contributions. You can use the IRS’s online Tax Exempt Organization Search tool to check your charity’s status. 
• Understand tax rules – For the 2021 tax year (with tax filing in 2022), taxpayers who take the standard deduction can deduct up to $300 in cash donations to charity. Married couples filing jointly who take the standard deduction can deduct up to $600 in cash donations. If you itemize your deductions, you can write off cash donations, as well as the fair market value of donated property and out-of-pocket expenses for volunteer work you do for a nonprofit organization, such as mileage.
• Collect the necessary documentation – If you itemize your charitable deductions, you’ll need written acknowledgement from the charity for all gifts of $250 or more. This letter should state the amount of any cash donation and a description of any donated property. It also needs to state whether you received any goods or services in return for your contribution.
• Look for ways to boost your donation – If you can’t afford a large donation all at once, you may be able to make smaller automatic recurring donations deducted from your credit card or bank account. Also check to see if your employer offers a company matching program for charitable donations.

Be sure to consult a tax advisor for guidance specific to your situation and your tax filing needs.