You are interested in giving to charity. But you might not know exactly where to start. What are the rules around tax deductions? What organizations are true charities? And how can you be sure your money is being used effectively? This Ultimate Guide to Charitable Donations will walk you through all the ins and outs of charitable giving, specifically from an individual donor perspective.
What follows is a step-by-step process for making sure your hard-earned money supports the causes and organizations that mean the most to you.
If you don’t have a lot of time, and you’re just looking for how to find out a specific charity is eligible for tax-deductible donations, download a comprehensive list here.
Topics covered will include:
1. Charitable donations market and trends
2. Tax deductions: rules and watch outs
3. How to choose a charity
4. How to tell if a charity is legitimate
5. How much to give and to which cause
6. Which platforms to use to make charitable donations
This guide will discuss donations, primarily from a cash perspective. To dive into specifics around donating physical goods, check out this guide by Beverly Bird at the Balance.
For a comprehensive guide on volunteering your time visit this blog post from Zelos, and for a guide on volunteering your time abroad, Kiersten Rich runs an excellent blog called The Blonde Abroad full of details based on her personal experience.
And if you’re a nonprofit leader, you may do better to refer to Spera Connect’s Ultimate Guide to Nonprofit Fundraising.
Hopefully, this guide to charitable donations can serve as a decision guide for your philanthropic efforts. Whether big or small, new or experienced donor, your efforts go a long way toward making our world a better place!
Because nothing remains static, as you’re reading this, if you come up with new ideas or things that should be added to this guide, please contact us to contribute to an update to the article.
1. Charitable Donations Market and Trends
Americans donated almost $450 billion in 2019 to charitable causes, according to the National Philanthropic Trust. To understand the magnitude, the 1.5 million public charities registered with the IRS spend approximately $2 trillion per year – this means almost a quarter of all expenses are enabled by donations.
Of this, approximately 70% of charitable donations came from individuals, while 13% came from corporations and 3% from foundations. High-net-worth individuals average almost $30,000 per year, while general population households give closer to $2,500.
Where do charitable donations go?
Giving to religion increased 2.3% between 2018 and 2019, with an estimated $128.17 billion in contributions. Adjusted for inflation, giving to religion was essentially flat, increasing 0.5% in 2019.
Giving to education is estimated to have increased 12.1%, to $64.11 billion. Adjusted for inflation, giving to education organizations increased 10.1%.
Giving to human services increased by an estimated 5.0% in 2019, totaling $55.99 billion. Adjusted for inflation, giving to human services organizations increased by 3.1%.
Giving to health organizations is estimated to have increased by 6.8% to $41.46 billion, an increase of 4.9%, adjusted for inflation.
Giving to public-society benefit organizations increased an estimated 13.1%, to $37.16 billion. Adjusted for inflation, giving to public-society benefit organizations grew 11.1%.
Giving to arts, culture, and humanities is estimated to have increased 12.6% to $21.64 billion. Adjusted for inflation, giving to the arts, culture, and humanities subsector increased 10.6%.
Giving to environment and animal organizations is estimated to have increased 11.3%, to $14.16 billion. Adjusted for inflation, giving to the environment/animals subsector increased 9.4% percent. This marks the category’s sixth consecutive year of growth.
A donor profile
The average donor in the United States is 64 years old and makes two charitable gifts a year. Additionally, data by Double the Donation indicate:
– 31% of worldwide donors give to organizations located outside of their country of residence.
– Female donors are more likely to make a donation because of social media marketing, while male donors are more likely to give because of email messages.
– Generational differences between donors can have considerable impacts, as well, as evidenced in the findings to the right.
– 67% of worldwide donors also choose to volunteer locally in their communities, and 56% regularly attend fundraising events.
How does giving look by generation?
Millennial Charitable Donations (born 1981-1996)
- Make up 25.9% of US population
- 40% are enrolled in a monthly giving program
- 46% donate to crowdfunding campaigns
- 16% give through Facebook fundraising tools
- 55% attend fundraising events
- 11% of total US giving comes from Millennials
- 84% of Millennials give to charity, donating an annual average of $481 across 3.3 organizations
- Millennials are active on their phones and respond best to text message and social media, but rarely check personal email or respond to voice calls
- Millennials are most likely to contribute to work sponsored initiatives, donate via mobile and watch online videos before making a gift
Gen X Charitable Donations (born 1965-1980)
- Make up 20.4% of US population
- 49% are enrolled in a monthly giving program
- 45% donate to crowdfunding campaigns
- 19% give through Facebook fundraising tools
- 56% attend fundraising events
- Gen Xers are most likely to fundraise on behalf of a cause, make a pledge, and volunteer their time to an organization
- Gen X prefers text messages or voice calls. These donors regularly check email and stay up to date on social media feeds
- Email prompted 31% of online donations made by Gen Xers
Baby Boomer Charitable Donations (born 1946-1964)
- Make up 23.6% of US population
- 49% of Baby Boomer donors are enrolled in a monthly giving program
- 35% donate to crowdfunding campaigns
- 21% give through Facebook fundraising tools
- 58% attend fundraising events
- 24% of Boomers say they were promoted to give an online donation because of direct mail they received
- 72% of Boomers give to charity, donating an annual average of $1,212 across 4.5 organizations
- Boomers answer voice calls, check email regularly, and also use text messaging and social media; though initially slow to adopt new technology, they take to it quickly once they do
- Boomers are most likely to make recurring donations on a monthly, quarterly or yearly basis
Greatest Generation Charitable Donations (born before 1946)
- Make up 11.8% of US population
- 30% of donors aged 75+ say they have given online in the last 12 months and on average give 25% more frequently than younger generations
- 88% of the Greatest gen gives to charity, donating an annual average of $1,367 across 6.2 organizations
- They represent 26% of total US giving
- Greatest prefer voice calls and direct mail; these donors are late adopters of email and do not typically use text messaging or social media
- Greatest are most likely to give through direct mail campaigns and donate physical goods
2. Charitable Donations and Tax Deductions
As you explore your giving options, pay attention to tax implications. A strong incentive for many, donations are often tax deductible for donors, and as a result, more giving occurs in December than any other month – to prepare for tax season.
What do tax rules mean for you?
Donations to qualified charities are tax-deductible expenses that can reduce your taxable income and lower your tax bill. You must itemize your tax deductions to claim them, however, and this is typically in your best interest only if the total of all your itemized deductions exceeds the amount of the standard deduction you would receive for your filing status.
Note: not ALL organizations are eligible to receive tax exempt charitable donations.
Tax law classifies charities and nonprofits according to their mission and organizational structure. Each group must register with the IRS for the section of the law that applies to it.
Religious and charitable organizations typically fall under section 501(c)(3) and can receive tax-deductible donations.
Not every section allows these deductions. For instance, social welfare and civic organizations registered under section 501(c)(4) don’t qualify.
However, two types of 501(c)(4) organizations—veterans’ organizations with 90% war vet membership and volunteer fire departments—do qualify for charitable deductions.
Because the IRS allows deductible donations to some entities that are not registered as a 501(c)(3), donors can get confused.
For example, taxpayers often have the mistaken belief that civic and employee associations, such as certain retired worker associations and sports groups, qualify as charitable groups.
Asking the organization about their qualification before making a contribution is recommended.
TurboTax provides additional ground rules that are helpful for determining if your gift is tax deductible, and this quick article is worth your time if unsure of your potential gift’s status.
To determine if a specific organization is eligible for tax deductible gifts, consult the Internal Revenue Service database, which is regularly updated with nonprofit statuses. Click on the download for Publication 78 Data.
How to claim a deduction
William Perez in The Balance offers great insight on how to claim your tax deduction:
You can claim a tax deduction for charitable giving on Schedule A.2 The total of Schedule A then transfers to line 9 of the Form 1040. You’d claim the total of your Schedule A deductions in lieu of claiming the standard deduction. You can’t itemize and claim the standard deduction as well.
The schedule isn’t just for claiming charitable donations. It includes and calculates all itemized deductions you’re eligible for. Other possible itemized deductions include things like medical and dental expenses you paid for yourself or for your dependents over the course of the year, including insurance premiums. They also include state and local taxes you might have paid and home mortgage interest.
Rules for claiming the charitable tax deduction
The IRS imposes several rules for claiming a deduction for charitable contributions:
You must actually donate cash or property. A pledge or promise to donate is not deductible unless and until you actually pay.
You must contribute to a qualified tax-exempt organization.4 Charities will let you know if they have 501(c)(3) tax-exempt status, but some organizations, including churches and other religious organizations, are not required to obtain 501(c)(3) status from the IRS. They count as qualified charities regardless, as do certain trusts and non-profit volunteer fire companies. The IRS provides a search tool so you can check the status of an organization you’re considering donating to, or check with a tax professional.
You must meet several recordkeeping requirements. This includes saving canceled checks, acknowledgment letters from the charity or charities, and sometimes appraisals that confirm the value of donated property.
Keeping records of your charitable donations
Your written records must indicate the name of the charitable organization, the date of your contribution, and the amount that you gave.
Canceled checks work well because the name of the charity, the date, and the amount of the gift all appear there. Bank statements are good, too, when they show a gift paid by debit card, and credit card statements work when they show this same information.
Charitable organizations will often provide donors with written letters of acknowledgment or receipts. The IRS can disallow charitable donations of $250 or more if you don’t have a written acknowledgment from the charity to document your gift, in addition to your other records.
Limits on your charitable contribution deduction
Generally, you can deduct contributions up to 30% or 60% of your adjusted gross income (AGI), depending on the nature and tax-exempt status of the charity to which you’re giving. You can deduct contributions of appreciated capital gains assets up to 20% of your AGI.
The limit for cash donations was 50% of your AGI through tax year 2017. The Tax Cuts and Jobs Act (TCJA) increased this threshold to 60% as of 2018 through at least the end of 2025 when the TCJA potentially expires.
You can carry the excess over to subsequent tax years if your gifts exceed these thresholds. Excess contributions can be carried over for a maximum of five years.
It used to be that your deduction could be affected if your AGI was too high, but this rule was repealed by the TCJA.
Other watch outs
It is important to know that some contributions are not tax-deductible, even if by following the above guidelines they may appear to be. These include gifts made to:
– Political parties, political campaigns or political action committees (PACs)
– Individual people (as opposed to organizations)
– Labor unions, chambers of commerce or other business associations
– For-profit schools or hospitals
– Foreign governments
For more information on estimating your charitable giving tax savings, check out Fidelity’s free calculator.
3. How Much to Give and to Which Cause
For the next step in this Ultimate Guide to Charitable Donations, let us return to our earlier question we asked ourselves: which cause is my money likely to do make the most social impact toward?
This is a dangerous question that risks spiraling a potential giver into indecisiveness and shame, especially if discussing with others about issues important to them. This might sound crazy, but think about how realistically some of these questions could pop up in a conversation about donations:
“Why would you give to an animals organization with so many starving people around the world?”
“How could you ignore the homeless people in our community but support local scholarship funds?”
“Child education isn’t NEARLY as important as getting high schoolers off the streets at night… what are you thinking?”
Not so unrealistic, is it?
If you’re unfortunate enough to be put in this place just remember: your dollars going ANYWHERE is more than not doing anything. There will always be higher ROI type ventures than others, and that is usually highly dependent on people, place and circumstance. But your decision to give should supersede any judgment attached to its motive.
According to Meera Jagannathan:
Most agree on one point: Charitable giving is an incredibly personal choice. “It’s what you feel like you can afford, how much a particular cause or charity means to you, how deeply affected you are by something and how much you want to help, and what you feel your responsibility to a community is,” consumer psychologist and “Decoding the New Consumer Mind” author Kit Yarrow told MarketWatch. “It’s just a very personal equation that everybody works out for themselves.”
Factors that play into that equation, Yarrow added, might include your personal-financial constraints like credit-card debt and loans; how passionate you are about a certain cause, issue or institution; and whether you’ve actually been engaged by an organization or charity’s outreach efforts.
But while “we all have an obligation to contribute to others,” Yarrow said, that contribution doesn’t always have to be monetary. “This is particularly true for those that are struggling with their own debt,” she said, suggesting donating time or energy instead. Palmer noted that some people may choose alternate, more informal ways of giving, like helping family members or a needy person next door — acts, in other words, that “might be just as legitimate a way to help others as writing a check.”
So, how much to give?
Everybody’s personal budget and circumstances will ultimately determine their specific giving patterns, but here are some general guidelines, according to Kristine Gill:
Just like housing, car insurance, and groceries, charitable donations should be factored into your budget, says Kristine Stevenson Seale, a financial coach in Temple, Texas. “Base the amount you give on your monthly income,” she advises. If you can afford it, make charitable giving about 10 percent of your budget. And get in the habit of donating once a month rather than at the end of the year. To maximize your donation, opt out of the incentive gift, like the tote bag or coffee mug, Buchanan says.
If a cash donation is a stretch one month, ask the organization if you can donate time or skills instead; you might do IT work for the website or organize a food drive. Remember, too, that you can give goods instead of money— bring tools to Habitat for Humanity, say, or personal-care products to a shelter.
Once a gift budget is determined, you will then ask is it better to give less money to more charities, or more money to fewer? Typically, your money goes further with larger donations to fewer organizations. The reason is typically due to the transaction fees, which are often fixed and become more economical the higher the donation.
Jason Franklin, PhD, founder and principal at Ktisis Capital advises giving based on a 50/30/20 rule:
You could dedicate 50 percent to one cause that you care deeply about, 30 percent to ones that you feel connected to but that aren’t top priority, and 20 percent to unplanned donations, like those random requests to sponsor your friend’s trivia team at a fundraiser.
4. How to Choose a Charity
You may ask yourself, “Which cause is my money likely to do make the most impact toward? And how do I identify charities that would help me make this impact?”
Many of us hold causes deep in our hearts that mean something to us. It is easy for us to identify our desire to help children, or invest in cancer research, or whatever. But it is not always easy to pinpoint an organization that will best use our charitable donations for this purpose.
We have already discussed the IRS master list of eligible organizations. But looking at a crazy-long spreadsheet with just names of organizations is hardly helpful.
If you don’t want to search through the database, fee free to download the complete list immediately here. You can search and filter based on location, category, and size of organization to help you in your search!
Click here for your free CSV file download.
Next up in this Ultimate Guide to Charitable Donations is a list of some of the top resources for researching charities and nonprofits in a more useful manner. While useful for potential donors, these tools also serve nonprofits looking to fundraise. For more information on nonprofit fundraising, check out The Ultimate Guide to Nonprofit Fundraising.
GuideStar
GuideStar (now called Candid) is one of the most popular nonprofit databases. Styling themselves as “the most complete source of information about U.S. charities and other nonprofit organizations there is,” the website allows users to search its database to find a charity to support, benchmark your own nonprofit’s performance, research the sector, and more.
The site aims to connect nonprofits, foundations, and individuals to the resources they need to do good, by leveraging research, collaboration, and training.
Users can set up a free profile, which grants them instant access to basic search functionality. A simple nonprofit search will field a list of organizations, including their locations, gross receipts, total assets, and other organizational information.
Further, users can search for “causes” by geography, organization, or financial characteristics. This is helpful when you don’t quite know who you’re looking for, but you know what.
For those financial inclined out there, GuideStar offers the most comprehensive repository of tax forms (990) out there. Click on any organization and find instant access to recent years’ 990 forms. This provides users with detailed financial summaries of organizations, outlining specifics related to income, expenses, assets, directors compensation, and more.
Who is this site ideal for?
Users looking for a comprehensive list of charities (over 1.8 million) in the United States. A special emphasis is placed on financial information, with the site’s repository of 990 tax forms serving as the foundation for much of its information. While all features described above are free, the site offers a “Pro” version which allows users more pointed search functionality (the ability to mine 990 forms for specific data across the universe of nonprofits, a feature not available with free access).
Charity Navigator
Charity Navigator (https://www.charitynavigator.org/) is a charity assessment organization that evaluates hundreds of thousands of charitable organizations based in the United States. It provides insights into a nonprofit’s financial stability, and adherence to best practices for both accountability and transparency.
Importantly, it is the largest and most-utilized evaluator of charities in the United States. According to the website:
Since 2001, we’ve been empowering millions of donors by providing them with free access to data, tools, and resources to guide philanthropic decision-making. Through our ratings, nonprofits are equipped with the nonprofit sector’s premier trust indicator and a powerful platform to raise awareness and funds.
Accessed more than 11 million times annually, donors can give with confidence knowing the organizations that are highly rated on Charity Navigator efficiently steward donations and are accountable and transparent. While we have a large footprint and an established, trusted brand, our team of approximately 25 considers itself small-but-mighty.
The site’s organizational pages are among the most detailed in this list, with comprehensive sections on finance/accountability, impact/results, program detail, leadership/adaptability, and culture/community. It uses numerical ratings for each of these categories and is very transparent with the math behind the scores (as can be seen here).
Who is this site ideal for?
Users who are looking for a focused answer to the question, “where should I start?” Its series of top-ten lists give a great starting point for research, and the credibility backing the reviews and ratings, along with the organization’s reputation as an industry leader allow users to give confidently. Also for users looking for a deep dive into the operations of each organization — this site is as good as it gets.
CharityWatch
CharityWatch is a nonprofit charity watchdog and rating organization that works to uncover and report on wrongdoing in the nonprofit sector by conducting in-depth analyses of the audited financial statements, tax forms, fundraising contracts, and other reporting of nonprofit.
They only review 600 charities out of almost 2 million in the US, with a focus on quality rather than quantity. CharityWatch encourages donors to give to charities that will allocate most of their contributions to program services that benefit the people and causes that donors wish to support. CharityWatch also promotes charity accountability and transparency through its research on the rapidly changing nonprofit field (like others in this list) and through its work with investigative journalists uncovering wrongdoing within the nonprofit sector.
CharityWatch rates nonprofits on an A+ (best) to F (worst) scale and provides data on charity executive salaries, governance, public transparency, donor privacy, asset reserves, and other information uncovered by its analysts during their evaluation. It publishes this information on its website and in its biannual Charity Rating Guide & Watchdog Report. CharityWatch also publishes lists of Top-Rated Charities, charities with high assets, and a report of top compensation packages paid to charity executives.
The site has limited browse criteria, having only an alphabetical list (with category filter) or curated lists of “top charities.”
CharityWatch does boast one of the more robust donor resources sections in this list, providing regulatory and watch out type information for interested donors.
One of the more interesting features on the individual charity pages is the ability to click and view “similar charities” to the one being viewed. This allows users to browse a specific cause and float across different organizations that might best serve their need.
Who is this site ideal for?
Users looking performing due diligence before donating their money. This site takes a purposefully negative approach to charity accountability, styling itself as a “watchdog” in the industry. This should provide donors the peace of mind that their dollars are going to legitimate causes and operations. The one drawback to the site is its limited browse functionality, with the inability to browse by geography. Fortunately, this is something that can be achieved with other sources on this list.
Give.org
“Helping donors give wisely, helping charities build trust,” is Give.org’s mission.
According to Consumer Advocate:
Give.org is the website for the BBB Wise Giving Alliance (WGA), an organization dedicated to evaluating national charities and reporting on their practices. Just as the Better Business Bureau focuses on consumer protection and industry self-regulation, the Wise Giving Alliance performs the same function for charitable organizations. They do the research and compile the data so donors can make informed decisions when selecting a charity to support. And they promote high standards of conduct for charitable organizations. Local Better Business Bureaus similarly report on regional charities.
The BBB Wise Giving Alliance helps donors make informed giving decisions and promotes high standards of conduct among organizations that solicit contributions from the public. It produces reports about national charities, evaluating them against comprehensive Standards for Charity Accountability, and publishes a magazine, the Wise Giving Guide, three times a year.
BBB WGA does not rank charities but rather seeks to assist donors in making informed judgments about those that solicit their support. Evaluations are done without charge to the charity and are posted for free public access on give.org. National charities that are found to meet all BBB Charity Standards have the option of signing a license and paying a fee for the use of a BBB Accredited Charity Seal that can be displayed on their websites and in their fund-raising materials.
BBB WGA reports on nationally soliciting charities that the public has most often asked about as well as charities that request to be evaluated. Give.org reports on about 1,300 nationally soliciting charities. In addition, about half of the 112 Better Business Bureaus in the United States and Canada cumulatively produce reports on over 10,000 locally soliciting charities using the same BBB Charity Standards as BBB WGA.
Users can access evaluation reports that show if a charity meets the BBB Charity Standards, learn about wise giving and issues addressed by BBB Charity Standards and find out how BBB Wise Giving Alliance completes reports on charities.
If you know what organization you are looking for more information on, the alphabetical list or standard search feature are perfect for you. Search functionality is limited to organization name or stated cause – in other words you cannot narrow in on a specific geography, org size or any other criteria.
The site’s BBB Charity Standards offers descriptions of its rating system for the charities in the database. Using a set of 20 metrics across governance, operational effectiveness, finances, and informational materials, the site rates each of the charities in its database. This gives users insight into a relatively trusted audit of each organization’s ability to meet each of these standards.
Each nonprofit’s page offers a breakdown of BBB’s analysis, as well as a link to the organization’s website, where users can then make donations.
Who is this site ideal for?
Users looking for a more detailed analysis of specific charities, with a BBB-like stamp of approval to guide their donation-making decisions. The site has a lower population of organizations than others on this list, but the detailed profile pages give donors an in-depth look at what they’re giving money to.
GreatNonprofits
GreatNonprofits.org is a comprehensive search/filter service that allows users to find charities by focused causes and locations. More importantly, it is a developer of tools that allow people to find, review, and share information about great – and perhaps not yet great – nonprofits.
The site has more causes than most other services and will focus your search to nearby municipalities as a default. You can then adjust these filters to find organizations that fit your search criteria. The site contains detailed information about an organization’s causes, mission, target demographics, number of beneficiaries served, geographies served, and even program detail.
Organization pages also promote social sharing and the ability to donate directly to the charity, should the mood strike.
Marketed as the “leading platform for community-sourced stories about nonprofits,” GreatNonprofits benefits from crowdsourcing information about charities in order to give potential donors a real picture of what they’re giving to.
What makes this database unique to others in this list is its ability for users to rate nonprofits on a five-star scale as well as the ability to earn “Top Rated” awards.
The GreatNonprofits Top-Rated Awards is the one and only people’s choice award where volunteers, donors, and people served by nonprofits are asked to share stories of inspiration, express their appreciation, and potentially help nonprofits earn a spot on the prestigious GreatNonprofits Top-Rated Nonprofits List.
These stamps of approval are placed on any nonprofits that can rally 10 positive stories and maintain an average rating of at least 3.5 stars.
With endorsements coming from the likes of Bill Gates, this is a legitimate site with a large following, making the network effects of its reviewer community impactful.
Who is this site ideal for?
Users looking for a more social experience, encountering real-life stories about charities and subjective ratings to help guide donation decisions. The stories component adds a level of personality to the organizations that help resonate with different people attached to specific causes. The detail attached to each charity page really gives users a sense of what they are giving to.
GiveWell
GiveWell is a nonprofit dedicated to finding outstanding giving opportunities and publishing the full details of our analysis to help donors decide where to give.
Unlike charity evaluators that focus solely on financials, assessing administrative or fundraising costs, GiveWell conducts research aiming to determine how much good a given program accomplishes (in terms of lives saved, lives improved, etc.) per dollar spent. Rather than try to rate as many charities as possible, they focus on the few charities that stand out most (by our criteria) in order to find and confidently recommend high-impact giving opportunities (our list of top charities).
This site works best for users looking to maximize their donation dollars. Updated annually, GiveWell’s list of “Top Charities” directs users to “high-impact, cost effective charities.” These short lists are comprised of different causes, generally in global impact areas such as extreme poverty, childhood vaccines, fighting malaria, etc. For those looking for more local causes, you might not get what you’re looking for here.
Users can donate directly to any of the charities on the site or through its Maximum Impact Fund. Using the latter method, GiveWell takes zero fees and will apply its judgment to allocate the Maximum Impact Funds among its recommended charities. They take into account charities’ funding needs and donations they have received from other sources. They then make these grants to the highest-value funding opportunities among the recommended charities.
GiveWell is more focused on channeling donations than providing a repository for nonprofits to research. Users looking to donate can do so through the Maximum Impact Fund which makes use of the site’s program research and evaluation, or can choose among a list of the site’s top ranked charities for a given cause.
Who is this site ideal for?
A great option for knowing what you want to donate to, but not who. The unique aspect of this site is that users can give to a specific cause, whose impact is quantified by GiveWell. This directs dollars to high-impact areas and gives donors the confidence that they are contributing to a solution, without having to research specific charities to do so.
5. How to Tell if a Charity is Legitimate
Using the sites in the previous section is a great start. The first step should always be to identify the organization in IRS’s exempt database. It is not enough that a charity is organized as a 501(c)3 – it must have exempt status per the IRS.
Once a charity is identified and you are reasonably certain of its success as a going concern, there are other tips for donors, as outlined by Mike Montali in the Huffington Post:
“Be careful with giving your credit card number over the phone or to an organization that only wants cash donations. Legitimate organizations typically have options for donating securely.
Understand that charities have administrative costs. If an organization claims that 100 percent of your donation will go straight to victims or resources, you may want to investigate further.
Trust your instinct; you should feel good about making a contribution.
Be careful about donating via text. Make sure you know what organization is receiving your donation follow the instructions.
When in doubt, consider making a non-cash donation such a food, clothing, or other goods.”
What about receiving calls for charitable donations?
If someone calls you asking for a donation, the FTC advises you ask the following questions:
- What is the charity’s exact name, web address, and mailing address? Some dishonest telemarketers use names that sound like large well-known charities to confuse you. You’ll want to confirm this information later.
- How much of my donation will go directly to the program I want to help? The caller is most likely a paid fundraiser, not the charity itself. So after the fundraiser gives you their answer, call the organization directly and ask them, too. Or see if the information is on the charity’s website. What else does the charity spend money on? Some fundraising can be very expensive, leaving the charity with little money to spend on its programs.
- Are you raising money for a charity or a Political Action Committee (PAC)? Not every call seeking a donation is from a charity. Some calls might be from a PAC where donations are not deductible and the PAC will use the money in a different manner than a charity would.
Other tips for avoiding charity scams
- Don’t let anyone rush you into making a donation. Scammers rush you so there’s no time to research their claims or think it through.
- Don’t trust your caller ID. Technology makes it easy for scammers to fake caller ID information. Calls can look like they come from your local area code, or from a specific organization, even if they don’t. In reality, the caller could be anywhere in the world.
- If the fundraiser says you already pledged, stop and check. They may lie and say — in a phone call or a mailer — that you already pledged to make the donation, or that you donated to them last year. They think that means you’ll be more willing to donate.
- Listen carefully to the name of the charity, write it down, and then research it. Some scammers use names that sound a lot like other charities to trick you. Do some research before you give.
- Watch out for sentimental claims with few details. Be suspicious if you hear a lot of vague sentimental claims, for example, that the charity helps many families that can’t afford cancer treatment and veterans wounded at war who can’t work, but don’t get specifics about how your donation will be used.
- Don’t donate with a wire transfer or gift card. Anyone asking you to donate this way is a scammer.
- Sweepstakes winning in exchange for a donation? Nope. If someone guarantees you’ll win a prize or contest if you contribute, that’s a scam. You won’t win anything, and your donation money will go to a scammer.
6. Which Platforms to Use to Make Charitable Donations
After a cause has been identified, and a charity chosen, the next step is to find a channel through which to donate.
The online marketplace
Online giving grew 20.7% in 2020, and 13% percent of all funds raised came from online charitable donations, the largest share as a percentage of total giving in the history of the Charitable Giving Report.
The report also found that nonprofit organizations of all sizes saw positive growth in online giving in 2020, with large organizations (total annual fundraising of more than $10 million) reporting an average increase of 15.0%, midsize nonprofits (annual fundraising between $1 million and $10 million) reporting an average increase of 24.9%, and small nonprofits (annual fundraising of less than $1 million) reporting an average increase of 22.3%.
Average donation amounts also increased, with the average overall donation clocking in at $737 (a $120 year-over-year increase) and the average online donation coming in at $177 (a $29 year-over-year increase).
Data, and changing economics due to Covid, suggest that this trend will continue, if not accelerate over the coming years.
Key Metrics:
- $128 dollars is the average online donation amount.
- $326 dollars is the average annual donation total for recurring donors.
- 67% of nonprofits across the globe are set up to accept online donations.
How do I make charitable donations online?
Many online retailers, social media hubs, crowd-funding sites, and other online platforms offer “giving portals” that provide a list of charities people can choose to support directly from the online platform. These giving portals have created new ways for people to donate, allowing donors to support causes they care about and charities to get the financial support they need.
Donors using giving portals may mistakenly believe that their charitable donations are going directly to their designated charities. But they may first go to an organization that accepts the donation and issues the donor’s tax receipt. That intermediary organization might keep a service fee from the original donation before sending the rest to the designated charity.
Online giving portals should give clear information to donors about what happens with the money donated through the platform. This helps donors understand how the process works. It also helps ensure that the giving portal doesn’t violate advertising law principles.
To help users navigate this complicated world, the Federal Trade Commission offers the following guidelines for donating online:
Donating Through Crowdfunding Sites
Crowdfunding is a way to raise funds online, person-to-person. Online platforms like GoFundMe, Kickstarter, and Indiegogo let people create crowdfunding campaigns. They’re easy to set up, and the organizers get the funds quickly. Here are a few things to know:
The campaign organizer sets the goal of the crowdfunding campaign. The organizer can set up the crowdfunding campaign to help specific people, like a family that lost everything in a house fire, or a veteran who needs help paying for medical bills. Or they can set it up to help a larger group or cause, like people who’ve been through a natural disaster in a particular area. Sometimes, crowdfunding campaigns have a business purpose, like raising money for a new invention or business project. The campaign organizers often ask for donations in social media posts or on crowdfunding sites.
There are many crowdfunding platforms, and each has its own set of rules. Platforms have different rules on how to set up the fundraising campaign, how much the platform will keep in fees, and how and when it will disburse the money to the campaign organizer.
The money raised goes to the campaign organizer. In a crowdfunding campaign, the money goes to the campaign organizer, not directly to the people or the cause it’s set up to help. The organizer is expected to tell you the truth about what the money raised is for and how it will be used, but it’s up to them to deliver on that promise. Scammers and dishonest businessperson can set up crowdfunding campaigns to raise money for themselves.
Only donations to a charity are tax deductible. Sometimes charities will set up crowdfunding campaigns. If it’s important to you that the donation is tax deductible, confirm that the organization is registered with the IRS as a charity. Look up the organization in the IRS’s Tax Exempt Organization Search
Avoid donating to a crowdfunding scam
It’s important to do your own research before you give because later it might be impossible to know whether a crowdfunding cause was real and if the money actually got to the intended recipient. Here are a few tips:
Find out who’s behind the crowdfunding request. If a friend posted, shared, or “liked” the request on social media, contact your friend offline. Ask what they know about the post. Do they know the person or group who’ll get the money? If not, try finding out who the campaign organizer is and look them up online. The crowdfunding platform should tell you who the organizer is. If you can’t find them online, or the details you find don’t match what they’re saying on the campaign page, be suspicious.
Do a reverse image search of the photos used on the crowdfunding campaign page. Search on your web browser how to do a reverse image search and see if the campaign images are associated with other names, or whether the details don’t match what the crowdfunding campaign is saying. Do a reverse image search of the campaign organizer’s social media profile picture, too. Scammers often use stolen photos and copy and paste other people’s stories. If you find anything suspicious, you can always help in a different way.
The safest way to give through a crowdfunding campaign is to donate to campaigns organized by people you actually know.
Crowdfunding campaigns to fund a business project or invention
A businessperson may set up a crowdfunding campaign to fund a project or an invention. They may ask for small contributions — $10, $50, $100 — but these can quickly add up to thousands of dollars in funding. In other cases, the goal is to get individual investors to give large amounts of money, perhaps in exchange for a reward once the project is completed — like getting a prototype of the new gadget or some other incentive.
But a dishonest businessperson might lie about the project or product and its development timeline. And they might lie about the rewards donors will get once the product is finished.
If someone asks you to give money to a crowdfunding campaign to fund a business project or invention:
Do your own vetting. Find out who the campaign organizer is, and look them up online. The crowdfunding platform should tell you who that is. Search for the organizer’s name and the name of the project together with the words “complaint,” “review,” and “scam.” See what you can find out. Ask the campaign organizer lots of questions. Have they launched other products successfully? Have they funded those projects using crowdfunding? Use what you find online to confirm the details.
Find out what happens to your money if the project doesn’t get off the ground. There’s no guarantee that the crowdfunding campaign will be successful and the project completed. Would you get a refund in that case? What risks are involved?
Confirm the production status. Having a 3D photo of the product doesn’t mean that the product is finished. Ask for a production schedule, and be clear on the current stage of development. Some crowdfunding sites don’t let fundraisers show 3D photos of the product on their websites because donors might mistake these for a finished product. Ask the campaign organizer if there is an actual prototype and if you can see it.
Understand the purpose of the campaign. When you give to a business project or invention through a crowdfunding site, you’re not buying the product. You’re simply helping fund its production. Be clear about what the fundraising is for and if you’re getting anything out of it.
Crowdfunding campaigns for medical treatments
If the crowdfunding campaign is for medical treatments, don’t assume those treatments have been tested and are safe. Some medical treatments that are promoted through crowdfunding are unproven and ineffective. Donors to crowdfunding campaigns for the development of medical treatments risk losing the money they donate. Chances are that the medical treatment won’t work. People also can be misinformed about the safety of these unproven treatments and may face serious harm from trying them out.
Donating Through Social Media
If you’re on social media, you’ve probably seen posts from people asking for donations. Pay attention to who’s asking and who’s getting the money. Don’t assume that a request on social media is legitimate, or that hyperlinks are accurate just because a friend posted it.
Check where the donation link goes. Does it go to a crowdfunding campaign? If that’s the case, any money you give will go directly to the crowdfunding organizer. It’s best to confirm with the person who posted the link that they know the person behind the fundraising.
If the link is to a charity’s website, research the charity before you give. Read Before Giving to a Charity to learn more.
Donating Through Other Online Fundraising Platforms
An online fundraising platform, or online giving portal, is a website that lets you donate to one or more charities you select from a list on the site. Companies like eBay, Amazon, Facebook, Lyft, and others have added charitable giving to their services. They’ve done this by creating online fundraising platforms and making them available to their members.
When you donate through an online fundraising platform, your money may not go directly to the charity you chose. Another company — maybe the platform or some other intermediary — may get your money first, take some of it as a fee, and then pass on the rest to the charity. And it may take time for the charity to get the money. That could be an issue if you’re donating to help people with immediate needs, like people affected by a natural disaster.
The best online fundraising platforms will have clear, easy-to-find information on their websites about
Where your money goes. Online fundraising platforms should tell you who gets your donation and how your money gets to the charity or beneficiary you chose. Just remember that even if a charity is listed on an online fundraising platform, you should still do some research on that charity to see how your donation will be used.
Fees. The website should clearly state if the platform or another intermediary will keep part of your donation as a fee before sending the rest to your chosen charity. Consider whether the charity would get more of your donation if you donated directly.
Timing. Online fundraising platforms should say how long it will take for the charity to get your donation.
Follow-through. Just in case your donation can’t be sent to the charity you chose, the website should say what happens to it — and how often that happens.
Your information. Check if you can choose whether or not your information is shared with the charity — or anyone else.
If these details aren’t clear, consider taking your donation money elsewhere. You can always go directly to the website of the charity you want to support.
Finally, what platform should I use?
One of the most convenient tools out there is Charity Navigator’s “Giving Basket.” It is a resource that helps donors manage their giving and includes several attractive features:
- Donate to multiple charities at once
- Set up recurring charitable donations
- Give anonymously
- Get one tax receipt
The site provides a convenient “how to” video here:
Other popular donation portals include:
America’s Charities
An alliance of more than 120 of America’s best charities. Its high-impact nonprofits are reviewed annually and must meet specific eligibility criteria before they’re approved for membership. This site focuses more on quality than quantity, so if you know what you want to donate to, but not whom, then this is your place. Just be aware of the low overall number of nonprofits in its database. Credit card fee is 3.5% of the transaction.
Just Giving
A highly effective crowdfunding site, geared toward funding charitable causes. Built on a platform of individual fundraising efforts, it allows users to build a campaign for existing charities, start a completely unique campaign for their own cause, or simply donate to existing charities and campaigns. The site boasts a roster of over 25,000 charities. and the site does not charge a transaction fee (though it encourages top-off donations upon checkout in order to support operations).
BrightFunds
Allows users to search for their favorite nonprofits or browse a list of site-curated funds. On top of that, more ambitious individuals have the ability to start their own fund to raise money for a cause important to them. Given the detailed infrastructure around the curation mechanism and the pooling of donations around causes, the platform charges a 5% transaction fee.
The site promotes its ability to make you a smarter donor by bringing free donor planning services typically used only by high net worth individuals. Every dollar you commit to a Fund is going to the most effective organizations serving that cause. Each Fund is built to support a holistic solution to big world challenges, rather than taking a fragmented approach. Whereas most platforms require users to select a specific charity, BrightFunds can be thought of as more like a “mutual fund.” Your fund is tailored to your specific “investment objectives,” and each fund is a collection of carefully selected nonprofits.
GoFundMe
One of the first heavily popularized crowdfunding platforms that allow people to raise money for all sorts of events, including charitable causes. The site is also the largest in the world for raising donations, boasting over $9 billion in funding from over 120 million people over the past decade. The site is more flexible than others, in that you can fund things other than nonprofit organizations, including business startups, personal expenses, and just about any other cause a person can think of raising money for. To make sure your donation is tax-deductible, users must ensure they are donating to a charity (something that is pointed out on the page). Transaction fees are 2.9% + $0.30 per donation.
As you can see there are often transaction fees associated with donations through online platforms. And as Spencer Tierney and Courtney Jespersen point out, processing fees on these types of websites often total 3-5% or more. While they typically offer specific functionality like advanced search and filtering capabilities, detailed profiles of charities or causes, or even just large databases of available options, it is important to make sure you know what you’re paying for and how much of your donation actually passes through to the charity.
A transaction or processing fee may be applied if you use a credit card or a third-party service for nonprofits to make a gift. If you make a $100 donation, the charity may get less than that.
If you want to ensure that as much of your digital donation gets to your charity as possible, here’s what you need to know.
How to deliver 100% of your gift
Some payment companies have programs to pass along an online or mobile donation in full.
Facebook covers all processing fees so 100% of a donation will go to the charity you choose, according to Facebook’s charitable giving page.
PayPal Giving Fund
PayPal’s donation platform gives the full amount of a donation to a charity and has no fees or deductions. This is separate from PayPal donate buttons, which have fees mentioned below.
Check
Although it’s less convenient, you can also send money the old-fashioned way by sending a check directly to a charity. Transaction fees won’t kick in, and you have the canceled check as your receipt.
In Conclusion
There you have it. You’re interested in making charitable donations toward a cause important to you. Here are the ins and outs, best platforms, tax watch outs, and hopefully all other high-level details you need to get started.
As you continue to search through your options, keep this guide handy to help you navigate the ever expanding world of charitable organizations and websites tailored to meet their needs. Not every website is the same, both in quality and in legitimacy, so be especially diligent with your research in order to make sure you are protected and that your money makes the best possible impact toward whatever it is you want to support.
Hope this Ultimate Guide to Charitable Donations helps you in your journey, and if you have any suggestions for edits to this article, please don’t hesitate to reach out.
Happy giving!