Demand is up; supply is down. Not talking about the markets here, or the hottest toy. This is the problem afflicting the nation’s charities.
The recession continues to take its toll, with more people in need. They include individuals and families who had always been able to take care of themselves, but are now unemployed for two years or more.
That same recession has taken a toll on charitable giving. Last year, 51 percent of charities reported a decline in giving — which forced them to cut budgets and staff. Now, the Nonprofit Research Collaborative’s latest survey finds that giving is edging up — but still nowhere near what it was a few years ago, and nowhere near keeping up with rising demand for services.
That’s where you and I come in. Consider what an extra toy or winter jacket could mean to a local family in need. Because this is a personal finance column, let me remind you of the rules for making charitable contributions tax-deductible.
??? — Always get a receipt from the charity. Keep these paper receipts in a file for use next April when you file and to substantiate your deductions in case of a future IRS audit. And you should copy your canceled checks, or keep bank or credit card records, or payroll receipts, as well.
??? — Some appraisals needed. If the clothing or household goods you donate is worth more than $500, the charity must note the “fair value” on the receipt. If the contribution is valued at more than $5,000, a qualified appraisal of the property is required. Special rules apply to donated vehicles.
??? — Timing is everything. If you make a contribution by check, it is considered delivered on the date mailed and must be deducted in the year of mailing. Credit card charges are deductible in the year the charge is made. Pledges are not deductible until payment is made.
??? — File for a deduction. If you want to deduct your contribution, you must file form 1040 and itemize deductions on Schedule A.
??? — Reporting required for gifts over $500. If you made a gift, or gifts, of non-cash property worth more than $500, you must file IRS Form 8283.
??? — Thanks, but your services aren’t deductible. If you donate services, only your out-of-pocket expenses are deductible.
— Get valuation for fundraising events. If you bought a ticket to a fundraiser (not political), the organization will give you written confirmation of the value of your contribution. Likely only 80 percent of the ticket payment is deductible.
This is not only the season of giving, it’s the season of scamming. Sad but true. So check out any organization claiming to be a charity. You can easily do that at CharityNavigator.org, which tracks and rates the performance 50l(c) charities, based on the forms they must file with the government. This allows you to make sure your money is going to a worthy cause that will spend your donation on good works, and not on administrative expenses.
Here’s a last thought on the subject of charity: It’s not all about the tax deduction.
There are many people around you who need help — but they’re not registered charities, so you can’t get a deduction for writing a check to your elderly aunt to pay her heating bill for the winter or to your adult child to help pay down student loans. You don’t get a deduction for dropping coins in the Salvation Army bucket or giving the taxi driver an extra tip this holiday season.
You don’t have to be “rich” to be charitable. As novelist Jack London once wrote: “A bone to the dog is not charity. Charity is the bone shared with the dog, when you are just as hungry as the dog.”
So use these coming weeks to re-think your definition of “charity” — and to open your eyes to the need around you. If there’s anything we’ve learned, it’s that government does not do a good job of “sharing” our money. This is something we can do for ourselves — with far less “administrative costs” and a far greater sense of personal satisfaction.