Jeremy Straub, the CEO of financial planning firm Coastal Wealth, notes that you might be more likely to see the visible impact of a donation to a smaller charity. “Typically, when you donate dollars on a local level you will have the satisfaction of seeing the dial move by the people that nonprofits services,” he says. But ultimately? “It is better to give to a nonprofit that you feel is important, whether big or small.”
You might have financial assets other than straight-up cash that you can donate.
Straub says there are a variety of financial assets that you can use to give to charities other than just taking cash out of your bank account. For instance, if a grandparent left you some money, or if someone gave you stock as a graduation present, you can contact the brokerage firm or bank holding the assets to ask them how you’d go about transferring it to charity, which can be as simple as filling out a form.
Another option is to donate a physical asset, like an old car, if you don’t think you’d get much money for it if you traded it in or sold it, or if you have a spare vehicle you just want to get rid of. Actually donating a car to charity is usually simple: Just call the organization of your choice, and they’ll come pick it up. Things get a bit more complicated if you want to deduct the donation from your taxes—that means subtracting the value of the donation from your income to lower the amount of taxes you have to pay. You need to figure out the fair market value of your vehicle, and what the charity plans to do with it. If they sell it, you can deduct the price they sell it for. If they plan to use the car, you can deduct the fair market value. The IRS has a pretty comprehensive pamphlet on vehicle donation that explains the process in more detail.
Even better for you and for the charity is if you donate something that has appreciated in value, like a painting, R.J. Weiss, a certified financial planner and founder of the The Ways to Wealth, tells SELF. “By doing so, one can avoid capital gains tax on the profit of that investment,” which means you won’t be responsible for paying the tax on the increased value of the asset. (We’ll talk more about taxes in a minute.)
“Say a family bought a piece of art from an artist for $500 and the artist became famous, making the art worth $500,000,” posits Joshua Escalante Troesh, founder of Purposeful Strategic Partners. Depending on how it’s used by the charity they give it to, the family may be able to take a large tax deduction based on the fair market value of the painting, $500,000.
When you donate items like household goods and clothing, you should always get an itemized receipt. In fact, keep strong records of any and all financial giving.
A donation receipt can be emailed or given on paper, and should include a bunch of information including the donor’s name, the nonprofit’s name, the date the donation was made, and how much was donated or the value of donated goods. These receipts are required for donations of $250 and over if you want to claim them as deductions on your taxes, but you should request them for anything, since it all adds up. That being said, you have to have a lot of deductions to actually get a tax break…read on.
While charitable donations are tax deductible, you may not get that benefit on your federal tax returns.
When you file your federal taxes, you can deduct certain costs to lower your total taxable income (and therefore the total taxes you have to pay on that income). There are two basic ways to do this: by taking the standard deduction, or by doing itemized deductions. The standard deduction is a set amount determined by the government. It requires no math on your part and effectively lowers everyone’s taxable income by the same amount based on filing status (like whether you’re filing on your own, or jointly as a married couple). When you itemize deductions, you have to list each one—such as state and property taxes, mortgage interest, and charitable donations—which is beneficial if the total is larger than the standard deduction. The Tax Cuts and Jobs Act passed last year makes things a bit different for this upcoming tax season, because the standard deduction for individuals and couples is significantly higher than before—$12,000 and $24,000, respectively.
