Ask Jill:

6 Steps to Take When Making a Charitable Donation

A monthly Q&A with Jill Schlesinger, CFP®, host of the Jill on Money podcast

Disclaimer: Jill Schlesinger is an ambassador for Marcus by Goldman Sachs and has received financial compensation. However, all thoughts and opinions are hers.

Marcus by Goldman Sachs is the sponsor of the Jill on Money podcast, featuring Jill Schlesinger, a Certified Financial Planner, CBS News Business Analyst and author of the new book “The Dumb Things Smart People Do With Their Money”. Listen to her podcast on Apple and Stitcher.

The Scenario: 

You’d like to give back this season, but want to make sure you pick the charity that’s right for you. 

The Question: 

What should I be thinking about or doing when deciding to make a charitable donation? 

Jill’s Take:

It’s that time of year, when we start to give thanks with our words, deeds and actions. While total charitable giving increased last year, when adjusted for inflation, it slipped by 1.7 percent to an estimated $427.71 billion, according to Giving USA 2019: The Annual Report on Philanthropy for the Year 2018. For individuals, the decline was 3.4 percent, adjusted for inflation. 

The reason for the drop off is likely confusion and complexities surrounding the first year of the new tax code. Because the standard deduction increased to $12,200 for single filers and $24,400 for married filing jointly in 2018, many people may have chosen to hold off on their charitable intentions until they could itemize their deductions in order to have the gift make a difference on their taxes. (More on that in step #4).

Many people are not giving solely on the basis of taxes, which is why everyone should follow these six steps:

Step 1: Confirm that the charity is legitimate

Do not provide any personal or financial information until you’ve researched the charity. Earlier this year, the IRS warned against a big uptick in charitable frauds. 

“Scam artists commonly use charities as a cover to lure honest people into providing money and sensitive personal information,” said IRS Commissioner Chuck Rettig. “Protect yourself, and make sure you are dealing with a reputable group before making a donation.”

You can access the IRS’s Exempt Organizations Select Check Tool to confirm the organization’s federal tax status.

Step 2: Investigate the charity’s financial health

Once you have confirmed that the group is legitimate, you can also see what others say about the organization and how much of your donation goes to supporting programs, versus administrative overhead. The Better Business Bureau’s (BBB) Wise Giving Alliance, Charity Watch, GuideStar, Charity Navigator and GiveWell are all helpful resources.

Step 3: Ditch the cash

Never send cash donations or wire money to someone claiming to be from a charity. If you are planning to send a check, IRS rules require that your payments must be postmarked by midnight December 31 for it to be counted for the current year’s tax filing. Just writing “December 31” on the check does not automatically qualify you for a deduction; and pledges aren’t deductible until paid.

Donations made with a credit card are deductible as of the date the account is charged, so if you are a little late in the process, you probably should stick to credit cards.

Step 4: Let the bull run!

U.S. stock indexes are up over 20 percent this year, which makes it a great time to gift appreciated securities from a taxable investment account because there could be potential tax advantages for the donor. That being said, the tax aspects of charitable donations can be complicated, so it’s always wise to consult with a tax professional.

Step 5: Divert RMDs

For those who are 70 ½ and older and need to withdraw money from a traditional Individual Retirement Account (IRA), consider a qualified charitable distribution (QCD), which allows you to direct some or all of your required minimum distributions (RMDs) to a qualified public charity. Important note: you cannot use this strategy for donations to a private foundation, nor to a charitable supporting organization. 

You can transfer up to $100,000 a year from your IRA and you can give away more money than your actual RMD amount. There are also some potential tax benefits with this donation strategy, but a QCD can be tricky (especially for Roth IRAs), which is why working with a CPA or CFP® can be crucial. These professionals will determine if your charitable contribution makes sense as a part of your overall financial plan, make sure you tap the correct accounts and help you keep meticulous records.

Step 6: Keep good records

For any contribution of cash or property valued at $250 or more, you must have a receipt (bank record, payroll deduction or written communication) identifying the organization, the date and amount of the contribution and a description of the property. For text message donations, flag the telephone bill with the name of the receiving organization, the date of the contribution, and the amount given.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.