It's that time of year again. Cold weather, holiday music, and calls for donations from every nonprofit.
I think giving to charity is a great way to give back to the community, so I do it every year. But now more than ever, every penny is important.
Am I donating to the “right” nonprofits? Will I lower my taxes at all?
We gave to many causes this year, including $199 in cash contributions to 501(c)(3) nonprofits and over $500 worth of noncash donations to Goodwill, along with cash support for a friend's family while she was undergoing cancer treatment.
Of these, we know we can deduct the donations to nonprofits and our noncash donations of books, clothing and household items to Goodwill.
But our assistance to a friend in need is not deductible.
Did you know that charitable contributions don't actually make a difference on your taxes unless you itemize deductions?
Last year, we didn't itemize, so there was no impact on our taxes, but this year, I'm interested in what matters. Charitable donations don't count dollar-for-dollar off your taxable income.
I played around with the e-file tax calculator that estimates your tax responsibility, but my charitable contribution didn't affect the amount owed.
Charity Navigator's Giving Calculator, on the other hand, said my taxes would be reduced by $18.15 if I itemized my deductions.
Even so, for most millennials without a mortgage or children, it doesn't appear to make sense to itemize deductions, as they won't exceed the standard deduction.
So give with an open heart, not with an eye on your tax refund.
How do I decide which nonprofit to give to? Not all donations are eligible for tax deductions — only contributions to 501(c) (3) organizations are.
My partner and I give to causes that are dear to our hearts. For example, we donate to Jewish organizations, Planned Parenthood, and the school where we studied in Jerusalem.
We are also interested in donating to an environmental cause this year, though we had no idea which organization to choose.
Using Charity Navigator we searched for environmental nonprofits, and we saw an organization that was familiar to us. When we noticed how much the CEO made, we decided to find another organization.
On each organizational page, similar nonprofits are listed. We came across Wildlife Conservation Network, which had a great rating and programs we liked.
If you're planning to give to a charity this year, keep these things in mind:
- Get a receipt and keep records. You might need to submit documentation of your donation, depending on how much you give. Also, I find it useful to know whom we donated to, especially as we give throughout the year.
- Give to 501(c)(3) organizations if you want to deduct your donation. Though we were happy to give to our friend's family, and we donate to nonprofits even though we aren't sure what impact it will have on our taxes.
- Don't donate your junk. Your noncash donations to Goodwill or Salvation Army must have some value.