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The economy is turbulent so nonprofits are turning more to individuals these days as corporate giving slows. If you are thinking of making a donation to a worthy charity, do it NOW before the calendar year ends and you'll get a break at tax time. And make sure you pick the right charity so your hard-earned money isn't wasted.

In 2006, individual giving topped $222 billion, according to the Center on Philanthropy at Indiana University. This accounted for 76.5 percent of all giving that year. In 2005 (most recent data available), individuals were able to write off more than $139 billion in tax deductions to charitable organizations, reports the Internal Revenue Service (IRS). (See also: Get the Most From Your Charitable Giving)  

Here are tips on making smart philanthropic moves during the holiday season.

1. Do your homework. Make sure the organization to which you are donating qualifies as a charitable organization. According to the IRS, money you give to religious organizations (i.e., churches, synagogues, temples, mosques) and charities with 501(c)(3) status can be deducted. Civic leagues, social and sports clubs, and groups that are run for personal profit do not qualify. Peruse the IRS Publication 78 for a full list of qualified organizations that is updated quarterly.
2. Learn how your money will be applied. Not every goodwill dollar is spent how you, the check writer, intends it. Research how your money will be applied. Remember that charities have expenses, but you should expect charities to spend 65 percent of the expenses toward the actual mission of the foundation, warns Bennett Weiner, chief operating officer of the Better Business Bureau Wise Giving Alliance, an organization that evaluates charities based on various financial and governance standards.  Also, be sure the foundation's practices match your expectations.
3. Give within your means. Effective budgeting is key to making philanthropy work. Giving a significant portion of your earnings in hopes of a large tax deduction is not wise. Instead, commit to giving either a little every pay period or opening a separate account specifically for donations. Also consider any raises or bonuses you may accrue in the next fiscal year. If there is a chance your pay will increase, you may want to hold on to your donation until January, to reap the benefits from the next tax period. Limiting your charities to one or two will also help you stay within your budgetary means. If you find you don't have money to give, volunteer your time. While it doesn't warrant a tax break, it still helps get the job done.
4. Never give cash. Be leery of organizations that encourage you to give cash. Write a check or use your credit card to ensure the donation is traceable for tax purposes for both you and the organization. Also, never write checks or credit-card payments to individuals; payments should be made payable to charities.

Remember contributions, both monetary or goods, with a value of less than $250 can be documented using a receipt from the organization showing its name, the date and place, and the amount or value of the contribution. Contributions valuing more than $250 must be acknowledged with a formal letter from the organization noting the amount. If you give other items, the acknowledgement must describe it but the charity does not have to value it. 

Here is a list of recommended charities with whom DiversityInc is affiliated:

Beta Alpha Psi

220 Leigh Farm Road

Durham, NC 27707

www.bap.org

Beta Gamma Sigma

Beta Gamma Sigma Inc.
125 Weldon Parkway
Maryland Heights, MO 63043

www.betagammasigma.org

Center for Students With Disabilities

233 Glenbrook Road, Unit 4174
Wilbur Cross Bldg., Room 201
Storrs, CT 06269-4174
www.csd.uconn.edu

INROADS

10 South Broadway, Suite 300
St. Louis, MO 63102
www.inroads.org

Jackie Robinson Foundation

One Hudson Square

75 Varick Street, 2nd Floor

New York, NY 10013-1917

www.jackierobinson.org

Leadership Education for Asian Pacifics Inc

327 E. 2nd Street, Suite 226
Los Angeles, CA 90012
www.leap.org

Native American Business Alliance

Native American Business Alliance
30700 Telegraph Road, Suite 1675
Bingham Farms, MI 48025
www.native-american-bus.org

United Negro College Fund

8260 Willow Oaks Corporate Drive
P.O. Box 10444
Fairfax, VA 22031

www.uncf.org

United Way of America

701 N. Fairfax Street

Alexandria, VA 22314

www.unitedway.org

Urban Financial Service Coalition

1200 G Street NW, Suite 800
Washington, DC 20005
www.ufscnet.org

More Financial Literacy >>

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