Source: Giving USA Foundation™ – Giving USA 2013 Highlights
People give to charities for a variety of reasons. They give:
- Because they have compassion for the less fortunate.
- From a belief that they owe something back to society.
- To support a favored institution or cause.
- For the recognition attained by making substantial charitable donations.
- To benefit from the financial incentives our tax system provides for charitable gifts.
Regardless of your reasons for giving, a careful review of the various ways to structure charitable gifts can help make your gifts more meaningful, both to you and to the charities you choose to support.
A charitable gift is a donation of cash or other property to, or for the interest of, a charitable organization. The gift is freely given with the primary intention of benefiting the charity.
Whether given during lifetime or after death, charitable gifts are eligible for a tax deduction, but only if made to a qualified charitable organization. For example, you may have a relative who has fallen on hard times, someone you choose to help with gifts of cash. While you may be motivated by charitable intentions in making these gifts, you cannot deduct them for either income tax or estate tax purposes.
In general, qualified charitable organizations include churches, temples, synagogues, mosques and other religious organizations, colleges and other nonprofit educational organizations, museums, nonprofit hospitals, and public parks and recreation areas. Gifts to these types of organizations qualify for a federal income tax deduction if made during your lifetime or, if made after your death, can be deducted from the value of your estate for federal estate tax purposes.
On the other hand, examples of non-charitable groups include labor unions, social clubs, lobbying organizations, chambers of commerce, for-profit groups and individuals. Gifts to any of these are not eligible for a charitable tax deduction.
If in doubt about an organization’s qualified status, ask the charity for documentation of its tax-exempt status. Alternatively, the IRS provides a complete listing of approved charitable organizations in Publication 78, Cumulative List of Charitable Organizations (http://www.irs.gov). (search Pub 78)
Don’t forget to check how much of your contribution is used for the charity’s mission verses how much is paid out in other expenses such as administration, salary, employee benefits and fundraising. http://www.charitynavigator.org/ is a good site to research a charity.