Remember, charity begins in your own back yard
November 9, 2005
By KATHLEEN LYNN
If you're getting ready to donate to charity, as many people do this time of year, Trent Stamp has a gentle reminder:
Look at the small, local charities - the food banks, rape crisis centers and other organizations - that do important work right in your own back yard.
Many of these groups, says Stamp, executive director of Charity Navigator in Mahwah, are "in for a rough winter."
That's because Americans have already given generously in response to Hurricane Katrina and other disasters. And overall charitable giving doesn't change much from year to year, consistently totaling about 2 percent of gross domestic product, Stamp says.
"If people don't have money left at the end of the year because they gave to the Red Cross back in September [after Hurricane Katrina], a lot of needy groups are going to get hurt," says Stamp, whose organization rates charities nationwide.
Half of all individual donations are given between Thanksgiving and New Year's Day, when people are in a generous holiday mood, he says. In addition, the donations figure into year-end financial and tax planning because charitable donations are tax-deductible.
If you'll be giving in the next few weeks, here are a few things to keep in mind:
- You can't afford to give to every worthy cause, so decide what's really important to you.
"What are you trying to do? Do you want to eradicate homelessness, clean up the environment, promote gay rights?" Stamp says. "Don't give in a scattershot way. Don't give just because you got a solicitation."
- Consider giving fewer, but larger, gifts. Two gifts of $500 each to your favorite, well-researched charities will have more impact than gifts of $20 to 50 charities, according to Stamp and give.org. And a lot of small donations will get your name on dozens of mailing lists.
- Get your name off mailing lists if you don't want to donate. For example, you may have given a gift in memory of a friend. That will put you on the organization's mailing list - but if it's not a cause you're interested in, you should tell them so they don't waste your time and their postage.
- If you can't give as much money as you'd like, consider donating goods or volunteering. If you volunteer, you can deduct the cost of driving to and from the place where you volunteer. Either deduct the actual cost of the gas or take the IRS standard deduction of 14 cents a mile.
If you donate goods, you can take a deduction for the value of the donation. But you can write off an amount only equal to what the item would fetch at resale. Even if you paid $75 for that winter coat your son outgrew, you can deduct only $5.20 to $24, depending on its condition. That valuation comes from the Salvation Army, which offers charts estimating the value of donated goods.
- Keep records of your donations for tax purposes. The charity is required to send you a receipt for donations of $250 or more.
- Look into creative ways to structure your gift. For example, if you donate stock or mutual fund shares that have appreciated in value, you can get a double tax break. Let's say you have a stock you bought for $10 a share that is now worth $22. If you donate shares of the stock, you won't have to pay capital-gains tax on the $12-per-share investment gains. And you can get the charitable deduction for the full $22 of the stock's value.
Or look at charitable annuities. In these vehicles, the donor gives a sum of money to a charity, and gets a charitable deduction. The charity then gives the donor yearly payments, which are partly tax-exempt, for life. After the donor's death, what is left of the original donation goes to the charity. This gives donors (especially older ones) income for life, but still benefits their favorite causes.
- Research the charity to make sure it's using money effectively.
That's even more important this year "because you need to make the dollars stretch," Stamp says.
His organization's guideline: Charities should spend no more than 25 percent of their budget on administration and fund raising. Some administrative costs are inevitable, Stamp says - the organization has to pay the staff and maybe even give the volunteers free coffee.
"But I would run screaming from any charity that doesn't spend at least 75 cents on the dollar on charity," he adds.
You can check national charities on charitynavigator.org and on give.org, the Web site of the BBB/Wise Giving Alliance.
Local charities are a little harder to research, but you can find some of their tax filings on guidestar.org.
Stamp also urges you to visit local charities and talk to their leaders and workers. Ask exactly what they do, how they measure their results and what percentage of the budget goes to administrative and fund-raising costs.
If the answers are vague, Stamp says, "find another charity."
Kathleen Lynn's column runs every Wednesday. E-mail: Lynn@northjersey.com.