In a time of copious environmental disasters, unmet medical needs, and widespread housing insecurity, the practice of charitable giving is indispensable.
Not only does charitable giving benefit the greater good and disadvantaged populations, but it can also give you a sense of personal fulfillment.
But how can you ensure that your gifts and support get to the right people? Unfortunately, the charitable giving landscape is rife with scammers and unkept promises regarding the final destination of your donations.
For example, the PayPal Charitable Giving Fund (PPGF) recently came under scrutiny over its transparency policies, ultimately reaching a settlement with charity regulators from numerous states. The PPGF has agreed to reform its disclosures so that donors better understand where their money is going and the timeframe in which their chosen charity will receive donation funds.
Further, questions about charitable giving become all the more relevant as we approach tax season. After all, many charitable donations are tax-deductible, as long as you donate to a tax-exempt organization, as defined by section 501(c)(3) of the Internal Revenue Code.
Tax deductions are typically allowed no matter the size of a donation and encompass tangible gifts such as clothing or food products, as well as monetary donations. As the PPGF settlement wholeheartedly demonstrates, it is imperative that you do your research before choosing an organization or cause to support.
Both corporate and individual givers alike should work to cultivate at least a basic grasp of charitable giving best practices and relevant terminology.
The good news is that nearly everyone can make room in their budget for charitable giving to worthwhile social and humanitarian causes.
1. How to choose worthy charitable organizations
But with all of the social and charitable organizations out there, how do you decide which to support. If a particular organization has helped you or a loved one out in the past, pledging your support may be an easy decision.
But many of us don’t have a personal connection to any particular organization, making the choice that much more difficult.
Even if you are passionate about a particular cause — feeding the hungry, for example — narrowing down your options may feel overwhelming. One useful tool for those looking to find the best charities to donate to is the Charity Navigator portal.
The online tool allows you to search for nonprofits by name or keyword, and subsequently view that organization’s financial and transparency-related data to help you make a more informed decision. Once you’ve decided on a particular organization, you have more choices to make.
For starters, how much can you honestly afford to give? Will your donation be a one-time gift, or would you rather set up recurring charitable payments into the future?
These types of details are highly personal, and only you can decide what charitable giving looks like for you, whether you are donating during the holiday season or another time of the year.
And even if you are on a limited budget, it is still possible to donate to charity. Consider setting up a special savings account reserved exclusively for charitable donations.
Even better, you could opt to donate your time rather than financial resources: Volunteers are welcomed in myriad charitable settings, from soup kitchens to domestic violence shelters, disaster relief, and more.
2. Protecting your assets in the face of generosity
Although you have a generous heart, you still need to ensure that your finances are protected before and after making a charitable donation.
When you are committed to the practice of charitable giving, the protection of your familial estate or business assets must also be prioritized.
It is a delicate balance that requires at least a basic understanding of tax law, or the assistance of a knowledgeable professional. While the bulk of charitable gifts are tax-deductible, there is, in fact, a limit to the tax exemptions offered for in-kind donations.
For most of us, the maximum exemption amount of $5.49 million likely won’t be surpassed, but even smaller amounts can affect the total tax exemption of your estate.
However, according to Villanova University, “there are ways to reduce your estate through giving without impacting your lifetime exemption.” These include the utilization of 529 college savings plans and taking advantage of annual inclusion gifts, totaling up to $14,000 per year.
Along with protecting your own assets in the wake of charitable giving, there are avenues you can take to ensure that your donations are distributed fairly and justly. Especially when making recurring donations, you can opt to give to organizations that have a donor-advised fund (DAF) in place.
DAFs allow donors to effectively retain advisory privileges over their donated funds while also receiving the maximum available tax deduction.
3. Charitable giving at the corporate level
Of course, not all charitable giving occurs at the individual level. What about when a business wants to give back? Does the protocol differ?
While the corporate donation process has some similarities to that of individual giving, businesses have extra factors to consider in the realm of charitable gifts.
For instance, because businesses face serious consequences if they try to write off a charitable contribution to an illegitimate organization, potential charities must be thoroughly vetted prior to donating.
Business leaders should be keenly aware of the causes that a charity supports to avoid potential conflicts of interest or the accidental support of a cause that is negatively perceived. When it comes to charitable giving, the protection of a company’s reputation must be factored into the equation.
Socially responsible companies are attractive to millennials, with 70 percent of the demographic reporting that they are willing to spend more on brands that support various causes. But if those causes are perceived to be negative, you could lose customers and may need to change your tune.
A recent example is that of the fast-food giant Chick-fil-A, which stopped donating to anti-LGBTQ organizations in November 2019 after significant pushback from its customer base, many of whom stopped eating at the restaurant altogether in protest of what they saw as discriminatory actions.
On the other hand, charitable giving can also be a powerful networking tool among small business owners, employees, and executives alike.
In fact, some of the most successful networkers are those who give back. By pledging your support to causes that are important to you, you are likely to attract attention from other industry professionals with a philanthropic spirit.
Final thoughts on charitable giving at the corporate level
If one of your financial goals is to set aside funds in order to give back to causes you care about, the good news is that the process of making charitable donations is more streamlined than ever.
There is a good chance that your favorite charities have the ability to accept funds via an online donation page, and it is easy to vet nonprofit organizations to ensure their legitimacy.
Further, your generous donations are likely tax-deductible, giving you even more reasons to contribute your time and money to worthy causes.
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Ainsley Lawrence is a writer who loves to talk about good health, balanced life, and better living through technology. She is frequently lost in a good book.