The end of the year is typically when most people think about giving back to their communities.
“The holiday spirit usually inspires people to turn their attention toward their community and charitable causes that are near and dear to their hearts,” said Vivian Loy, senior wealth strategist at PNC Wealth Management.
While you might get caught up in the spirit of Giving Tuesday or are moved by the sight of a neighborhood bell ringer, there are certain things to consider before giving to charity so you can make the biggest impact possible.
1. Make sure the charity is legitimate
Unfortunately, there are some illegitimate organizations and fraudsters that prey on people’s sense of goodwill, especially during the holidays.
Loy advises people to do their due diligence before making any donations so they can be sure their money is going to the right places. Check to see if the charity is qualified by going to the IRS website.
Additionally, Loy recommends keeping receipts and documentation related to your charitable donation. For donations less than $250, the IRS needs a record of the donation. For donations over $250, the charity must give you documentation acknowledging the name of the charity, the date and amount.
2. Take advantage of employer matching opportunities
Some employers will match your donations.
“Find out if your employer will match your donation. This can significantly increase the impact of your gift,” Loy said. “Check with your employer to see if your charity meets with their guidelines. Employers can also reward employees by giving them money or time off for volunteering to a nonprofit organization.”
3. Know the impact of tax reform
The tax reform law that went into effect earlier this year affects some aspects of charitable giving. The standard deduction doubled to $24,000 for a married couple filing jointly and $12,000 for a single person, so more people will take the standard deduction rather than itemize.
However, if you want to claim your charitable donations, you have to choose itemize deductions on your tax return.
“The tax changes have reduced many of the financial incentives for making charitable donations,” Loy explained. “If you itemize your deductions, it’s important to know the IRS rules when it comes to the assets you are donating. For instance, are you giving cash, stocks or something else of value? You should know the deductibility of the asset you are donating for that year.”
Loy noted that there are some strategies you may be able to use due to the changes to tax law, including bunching, which is giving multiple years’ worth of charitable donations in a single year. For those over 70 ½ and already taking their required minimum distributions, you can donate up to $100,000 of your required minimum distribution to charity.
4. Make it a family affair
If you are able to, try to involve your children and extended family in your charitable endeavors.
“Giving back to the community isn’t just limited to monetary donations,” Loy said. “There are plenty of opportunities to involve your children so they can see firsthand the effects of their time and money.”
Loy suggested talking to your children about causes that are most important to them, and then finding ways for the whole family to support those issues. For instance, you could spend an afternoon serving food to people at a local soup kitchen or your family could volunteer at an animal shelter.
“If your family supports a cause that the child is interested in, you can instill in them a philanthropic spirit at an early age,” she added.
Regardless of how – or even when – you support your community, Loy stressed that giving back should come from the heart.
“It’s not just about the size of the donation,” she added. “There are plenty of opportunities to take a hands-on approach to charity, but don’t just limit yourself to the holiday season. We tend to think about giving back most often at the end of the year, but one of your New Year’s resolutions could be to get more involved throughout the year.”