But how can you give responsibly while also making sure your own household remains financially secure?
Before signing any checks or making any transfers, it’s important to first assess your own financial situation to determine whether it’s the right time in your life to give, says Andrew Feldman, CFP®, president and founder of AJ Feldman Financial in Chicago.
“Make sure you’re not hurting yourself,” he says, adding that this means paying off any high-interest loans and chipping away at personal debt first.
Especially for younger aspiring givers who may be saddled with student loan debt or other personal debt, it may be a good idea to consider donating time to services and charities that interest you vs. giving money, Feldman says.
Checking into charities
For those with the means and the will to give responsibly, there are several steps to consider if you’re looking to give responsibly.
According to Ameriprise Financial, a good way to begin is to define your charitable goals by determining what’s important to you and your loved ones, locating a real need, and deciding where you want your support to go.
Once you’ve narrowed your interests, it’s time to find an established charity. Searching a website such as Charity Navigator or checking out the Better Business Bureau’s site can help you find reputable organizations to which to donate money. GuideStar also makes it easy to search for and view the financial documents of nonprofit organizations.
Lowering your tax bill
The IRS has published a list of eight ways that charitable donations can pay off on your tax return. The suggestions include filing a Form 1040 with itemized deductions on Schedule A and maintaining detailed bank records, payroll deduction records, or “a written communication from the organization containing the name of the organization, the date of the contribution, and amount of the contribution.”
Depending on your situation, you may want to consider participating in a donor-advised fund, which the National Philanthropic Trust defines as “a philanthropic giving vehicle administered by a charitable sponsor.” This type of fund “allows donors to establish and fund the account by making irrevocable, tax-deductible contributions to the charitable sponsor.”
Donors can think of these as charitable investment accounts, according to Evan Kirkpatrick, a Los Angeles-based entrepreneur focusing on capital strategies and philanthropy. Donors receive an immediate tax deduction for contributions, and there are no annual giving requirements. Furthermore, individuals can grow the donor-advised fund tax-free over time and make donations whenever they choose, writes Kirkpatrick on Forbes.com.
Some contributions made to fundraising sites such as GoFundMe may be tax-deductible, while others may not. Such sites typically will address this question, but you may want to check with a tax professional before making this type of donation.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.