The Philanthropic Mindset: How to Give Well and Wisely
Having a desire to give and a philanthropic mindset are both important qualities to possess in modern society. With so many economic and social challenges in society, contributions to charities and philanthropy efforts are needed now more than ever. While you likely may appreciate the value of giving, you also want to give wisely. Below are a few simple tips to ensure your contributions are going where they are needed.
Research Where You Plan to Give
Whether you are planning to donate directly to a charity or to contribute to a fund with a philanthropic focus, it is important to research them before committing. Legitimate charities and philanthropic funds will happily share information about them. You also can learn public information such as their mission statement and a balance sheet. This information will provide you a clearer picture of what your contribution will be used for.1
Know How the Non-Profit Spends Its Money
Information on non-profits will likely be found through public sources, including a breakdown of how leaders spend the organization’s money. Look at potential places you want to contribute and see how much money goes to administrative costs, executive salaries, and the actual programs and services. If you are looking to make the most impact with your giving, choose a non-profit that puts a higher percentage of their received funds into their programs and services, rather than overhead.1
Know the Difference Between "Tax Deductible" and "Tax Exempt"
One of the many advantages of charitable giving and philanthropic efforts is the tax deductions available for certain contributions. If you’re eager to receive these benefits and lower your tax threshold, it is crucial to understand the difference between "tax-exempt" and "tax-deductible" organizations. Most non-profits are classified as tax-exempt, which simply means that they are not required to pay taxes. This does not mean that contributions to them are automatically tax-deductible. If a contribution is classified as tax-deductible, it means that the donor will be able to deduct the donation from their federal and possibly state tax return. Always check with the organization you are planning on giving to if they have paperwork to show the contribution as tax-deductible.1
Don't Base Your Decisions on Emotion
It is easy to get caught up when someone is trying to appeal to your emotions with sad stories and dire statistics. Even though emotion can play a role in philanthropic efforts, it is critical to consider any actual contribution rationally and strategically, instead of letting emotions push you into a contribution you may later regret. If you are faced with an emotional plea from an organization, simply let them know that you will consider it and contact them back later. If they continue to push, it could be a red flag that the organization may not be as it seems.1
Giving well to philanthropic efforts and charities is a great way to personally address problems that continue to plague society and to help those in need, but it is important to also give strategically if you want to make the most of your investment efforts.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article is prepared by WriterAccess.
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Footnotes:
1 “Tips for Giving Wisely,” Charitywatch.org, https://www.charitywatch.org/charity-donating-articles/tips-for-giving-wisely
