7 tips to make the most of your charitable donations

While the holiday season is the most popular time for making charitable donations, any time of year can be a good time for giving. Supporting charities and causes you believe in can make you feel good about spending money, and you can also reap other rewards in the form of tax deductions for donations. Here’s guidance to help you make the most of your charitable donations, no matter how large or small your gifts.

What you'll learn:

1. How to create a giving plan

2. Ensure the charity is legit

3. Make your money work harder

4. Take advantage of matching programs

5. Bundle your charitable donations

6. Make a charitable donation from an IRA

7. Give more than money

While the information provided here is based on our understanding of current tax laws and has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

1. How to create a giving plan

The same way you budget for things like travel, home improvements or car repairs, you can include charitable giving in your annual budget. Open a high-rate savings account explicitly dedicated to your donation fund and set up automatic transfers to put away a little money each month. By opening the account, you can let the funds gain interest for a set amount of time and be able to donate a little extra at the end of the year.

2. Ensure the charity is legit

Before you part with your money, confirm that the organization is a registered 501(c)3; you can use the tax-exempt organization search tool on the IRS website. Next, look up the charity on a rating site like Guidestar.org or CharityNavigator.org, which provide detailed financial information about how the nonprofit spends its money. For example, you can find how much of the charity’s budget goes toward programs vs. how much goes to the CEO. Based on this information, you can assess whether and how much of a charitable donation you want to give. Also, it’s best to donate directly to the charity rather than through a phone solicitor because telephone charity scams are popular – and sadly effective – among fraudsters.

3. Make your money work harder

There are so many great organizations and causes out there that it can be hard to pick only one to support. However, because of various handling and processing costs often associated with receiving donations, your money usually goes further by limiting your charitable donations to just one or two charities. Rather than giving $50 to 10 charities, you could make a bigger impact by giving $500 to one charity.

4. Take advantage of matching programs

Does your employer have a charitable donation matching benefit? For example, Alliant offers employees up to $1,000 per year in charitable donations matching 501(c)3 organizations. So, if an Alliant employee donates $1,000 to their favorite charity, the Alliant Credit Union Foundation will match the donation. Also, look for organizations offering to match donations to charities during limited promotional periods. Local NPR stations often do these types of matching promotions during pledge drives.

5. Bundle your charitable donations

Because of past tax law changes with higher standard deductions, many taxpayers won’t be able to claim a tax deduction benefit for donations. To make the most of your contribution while still getting the tax deduction benefit, save up your charitable donation budget for two years rather than giving money every year. For example, if your annual giving budget is $1,000, you could give $3,000 every three years instead. This larger amount could allow you to take the itemized deduction to get the tax benefit for simply supporting your favorite charities that year.

6. Make a charitable donation from an IRA

IRA owners age 70½ or older may have the option to make a distribution directly from an IRA to a charity tax free by setting up a QCD, or qualified charitable distribution. For those 73 and over, QCDs count toward the IRA owner's required minimum distribution for the year. Just be sure to report on your federal income tax return and reach out to your IRA trustee if you have any questions.

7. Give more than money

Sometimes donating your time can be the most valuable resource you can give to a charity. Get in touch with local organizations and see what they need help with. Whether it’s volunteering to help at a one-time event or becoming a regular volunteer staff member, you’ll get the chance to make a difference for an organization you care about and see the impact you’re making first-hand.