It’s the holiday season…time for gifts, gatherings and giving back. This year, with inflation still squeezing many budgets, it might be more difficult to do so. But, if you do have some wiggle room and want to give back, there are plenty of opportunities. This year, many charities are feeling the pinch with less disposable income. According to Giving USA, 2022 brought a drop in charitable donations for only the fourth time in 40 years. And, while donations were up $20 million on “Giving Tuesday,” the number of donors was down roughly 10% from 2022. In other words, while many people are still giving generously, fewer Americans overall are choosing to give.
Giving Back? You’ve Got Options
For many years, donating by check, credit card or in person with cash were the only options people had when looking to donate to charity. But today, there are countless other ways to do so.
“Today’s donors not only have diverse assets at their disposal, but also numerous ways to contribute them effectively,” says Alexis Miller, Donor Engagement and Strategic Partnerships Lead for Endaoment. “Particularly those with highly appreciated assets like stock or cryptocurrency might find it advantageous to donate these assets in their original native form.”
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But how, exactly, do you even start with donating something like stock or crypto? Many charitable organizations are set up to receive stock or crypto directly, or, you can use a third party platform, like Endaoment, which accepts and converts these assets into cash for charities, and issues compliant tax receipts for the donor. “By giving the original asset, donors can potentially avoid capital gains tax and deduct the fair market value,” adds Miller. *
Another option for giving is via what’s called a “donor-advised fund,” more commonly known as a DAF or a charitable giving account (check out our explainer on DAFs, here). “DAFs serve as a vehicle for streamlining giving, offering a tax incentive to give immediately, grow those charitable assets, and ultimately grant them out over time to the nonprofits they care most about,” says Miller.
In other words, donor-advised funds are charitable giving vehicles that allow individuals to make contributions to a fund, and get an immediate tax deduction when they do. Typically, DAFs are managed by a sponsoring organization, and donors get to make recommendations on exactly how their funds get distributed to various nonprofit organizations.
If you’ve considered giving back via non-cash assets, there are some things to consider. “Donors should consider giving highly-appreciated assets, held for more than a year, for the highest potential tax advantaged way of giving,” says Miller.* And if all of this sounds confusing — or even if it doesn’t — you should also consider working with a financial professional to ensure you’re making your donations in the most effective way possible.
But First, Do Your Homework
According to data from the FBI, Americans lose millions via charity scams annually. Not falling victim to bogus requests for donations starts with doing your homework and educating yourself about where your money is going.
“Before making any donations, research the charity thoroughly,” says Kevin Scally, Chief Relationship Officer at Charity Navigator. “Ensure it’s a valid 501(c)(3) nonprofit organization – these are the only organizations where your donation is tax-deductible.”
All nonprofit organizations will have an Employee Identification Number (EIN). This helps donors identify the organization seeking funds via the IRS’s Tax Exempt Organization Search. You will also want to seek out the charity’s online presence to find information about their mission, programs and history. Lastly, check out their profile on Charity Navigator or other similar websites, like the Better Business Bureau’s Wise Giving Alliance, Charity Watch or Guidestar.
Know The Scams
Experts say 2023 is the year of the “copycat charities” scam. “Copycat charities are a common way scammers take advantage of people looking to donate around the holidays,” says Scally. “Scammers may use names that closely resemble legitimate charities to deceive donors.”
In addition to copycat charities, donors should also proceed with caution whenever the phone rings: If someone calls you soliciting donations and pressures you to donate immediately, hang up. You should never EVER give out your credit card number or personal details over the phone, unless you initiate the call to a number you trust. Likewise, if someone ever asks you to donate cash, or wire funds, that should also trigger a red flag. If that happens, abort mission, and seek out the official website of the charity to confirm you’re in the right place. Scammers may also send emails requesting donations, which are best just deleted. If you receive one that looks suspicious (or even if it looks legit) don’t click any of the links or open attachments. Instead, visit the charity’s official website to make certain your money is going to the right place.
Everything You Need To Know To Avoid Charity Scams: From Charity Navigator
You work hard for your money. And there’s nothing worse than having your hard-earned cash go to waste…especially if it happens as a result of a scam! If you’re planning on giving back this holiday season, Charity Navigator has these best tips:
Spot the copycats: To protect yourself and your money by double checking the organization’s name and website URL to ensure you are donating to the charity you intend to…and not a copycat.
Donate via a trusted source: Scally says you should only donate directly through the charity’s official website, or a trusted platform that facilitates donations.
Use secure payment methods: Do not (we repeat, do NOT!) share your credit card information via email or social media. If you’re donating online, only use a secure and trusted payment method. If you want to donate via phone, make sure YOU initiate the call, to a trusted number that you’ve verified.
Think twice before you share personal information: If a charity asks for your Social Security number, that should trigger a red flag. No charity should EVER ask for that when taking a donation. Scally also cautions against providing other sensitive personal information, like your full address, to charities.
Bottom line, go with your gut: Does something just feel…off? “Scammers often use emotional appeals to manipulate donors,” says Scally. “So always take a step back and assess the situation before making a donation.” Remember: No one from a legitimate charity will ever pressure you to donate right on the spot. Anytime someone makes you feel a sense of urgency to offer up payment, it’s time to hang up, walk away, and take steps to confirm exactly who you’re dealing with.
MORE ON HERMONEY:
- 8 Places To Donate (Or Sell) Clothes And Make Money
- I Want To Give Back More…How Do I Do It?
- How To Ensure A Nonprofit Is Making The Most Of Your Money
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