3 Things To Know Before Donating Blindly To Charity

Maybe you’ve made a New Year’s resolution to give more. Maybe a charitable need has somehow touched your life or the life of someone you love. Or maybe you’re simply in a giving mood. Whatever the reason, charitable giving is a way to support a cause you believe in or lend a hand to a nonprofit with a mission you admire.

Before you donate to a charitable cause though, you’ll want to have a better understanding of where your money’s going, who or what it’s helping, and how it can impact your finances.

Where’s Your Money Going?

Let’s look at spending ratio. This is the number that can help you better understand where your donated money is actually going. According to Debra Snider, vice president of operations at GuideStar, “The most efficient organizations spend at least 75 percent of their budgets on programs and services (referred to as the ‘spending ratio’), with the remainder going toward administration and fund-raising costs…Obviously, the higher the spending ratio, the better, since it illustrates the charity’s productivity.”

To find out the spending ratio of a particular charity, go to the watchdog site Charity Watch and search for the organization of your choice. You can find the program percentage under “Ratings & Metrics.”

What Is The Group’s Nonprofit Status?

Oftentimes, money you donate can be deducted from taxable income, which simply means it won’t be taxed. To find out the status of your monetary contribution, look up the charity’s tax status on Charity Watch. The most common tax statuses for charities are 501(c)(3) and 501(c)(4). In general, a 501(c)(4) donation is not tax deductible, while 501(c)(3) donations are.

The 2017 tax law stipulates that the standard deduction for an individual is $12,000 and $24,000 for a married couple filing jointly. What exactly does that mean? Your deductible expenses — including your charitable donations — will need to equal more than $12,000 for an individual or $24,000 for a married couple to be able to take advantage of the charitable giving tax benefit.

Is The Organization You’re Donating To Legitimate?

Visit the Charity Watch site to check an organization’s profile, including its address, mission statement, and total expenses vs. total contributions. You can also find out how much it costs the charity to raise $100. This is an indicator of the organization’s efficiency. Charity Watch also gives organizations an overall grade, so you can see how a charity stacks up against another.