Be Wary of Year End Charitable Contribution Calls

Donation Box Follow Me on Pinterest Right around this time of year the phones start ringing, real paper letters start showing up in your mail box and their virtual counterpart, emails, begin to fill your virtual inbox.

No, I’m not talking about the sales circulars… I’m talking about organizations fishing for charitable contributions!

End of Year Push for Charitable Contributions

I’m sure you have noticed the yearly push for charitable contributions has begun. I’ve already received mail from my local volunteer fire department and have received a couple calls from various charitable organizations. Giving to charities is a noble cause but you should never feel pressured to give.

I set an annual giving budget and when it is gone I quit giving for the year. I only support the charities that I chose and I won’t donate to every single one that calls. I feel that my giving budget should support the causes I care for in the most efficient way possible so I rarely give at the end of the year.

There are a few things the charities may say to try to convince you to give now. Charities are very good at fundraising and you should be prepared and know some of their tactics ahead of time. Don’t get me wrong, I totally support charitable giving. I just don’t support the end of year fundraising blitz.

Your Gift is Tax Deductible… Maybe

Charities make a huge push that your contribution is tax deductible and that by giving to charity you will save money on your taxes next year. Not so fast. The people calling on behalf of the charities probably aren’t tax professionals. You will only get a tax deduction if you can itemize your deductions. What does that mean?

In order for the deduction to actually save you money on taxes you must have more itemized deductions on your tax return than your standard deduction which isn’t always the case. If you’re not sure, take a look at last year’s tax return and see if you used the standard deduction or if you itemized deductions.

Another item to note is that for every dollar you give to charity you won’t receive a dollar off of your tax return. There are certain tax preferences that have this treatment but they are called tax credits and charitable giving is a deduction, not a credit.

A deduction will reduce your taxable income, not your tax due, by one dollar for every dollar of deductions. This means instead of saving a dollar you’ll only save your marginal tax rate (the rate you pay on your next dollar of income) for each dollar you give.

Urgency – The End of the Year is Coming!

Finally, charities will make it seem urgent that you give before the end of the year. As long as Congress doesn’t eliminate the charitable contributions deduction (which I think is very unlikely) you can still take this deduction next year. The charity will still be accepting donations! On top of that, if you’re marginal tax rate increases next year your charitable contributions will be worth even more next year!

Do you give to charities at the end of the year fundraising blitz?

photo by: dbaron

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.

Comments

  1. What you’ve said is totally correct for federal taxes, but for state taxes there are some states that have dollar for dollar tax credits for donations to specified charities.

    For example, I know for a while Arizona had a $250 tax credit for education. If you donated up to $250 to a public school (or organization at a public school), you would get a dollar for dollar tax credit on your state taxes. It was basically a way of specifying exactly where you wanted your state tax dollars to go.
    The schools did a big push for donations at the end of the year to capitalize on this.

  2. We really don’t at give for the year end callers either. We too have a budget that we use to give out of and is usually used up by year end.

  3. I give based on supporting a particular charity. I never succomb to telephone solicitors or the like.

  4. We do not have a house phone so that has cut down on many calls…but we do charitable donations to something we believe in…but it is buying gifts for children in need or something like that…never really a monetary donation..

  5. We give to charities year-round so we only partake in a few end of the year things (primarily through church and adopting families). The people that annoy me the most in terms of calls is the freaking blood bank. Those people are like bill collectors!!

  6. As this is the first year not being a student, I generally haven’t given much to charity since I was always barely hanging on money-wise. I usually just donate $10 or $20 here or there for friends that are doing fundraising events or when people ask me outside / near stores or in the mall. Definitely going to up my donations as I get a bit more of a buffer with my finances !

  7. It’s the giving time of year, and there are definitely those who will pester you for your money. yes, there are many, many hurting people out there, but sticking to well known and trusted avenues will save some heartache. I have way too many tax clients who think their giving is deductible, but it’s not to a qualified charitable organization.

    BTW, just a little factoid, the government is someone who you can give to and get a deduction! HAHAH!

  8. Use Charity Navigator to see if your charity is legit.

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