I have been excited about Giving Tuesday ever since it was created several years ago. Why? Not because I’ve adopted it as the day when I do all my giving, and not because I have an organization that receives extra giving. I’m excited because Giving Tuesday draws attention to one of the three core uses of our money — the one that gets the least attention.
The core ways in which we use our money are: Spend, Save, and Share. Financial educators (like me) don’t talk about “Sharing” nearly as much as we talk about the other two, and yet we should – it’s important. There is debate whether we humans are inherently altruistic, or whether it is something we learn. None-the-less, people who choose to give typically report that they gain some type of psychological benefit or reward when they give, regardless of whether they can give a lot or a little. It “feels good” to give.
It feels even better to give when we know that our gift is appreciated and/or that it makes a difference. When we give gifts to loved ones, we (hopefully) can see that the gift is appreciated. When we give to organizations or causes, it’s not always so easy to tell. When giving to a local organization whose work you know well, you may see evidence of their good work in your community; you may even know some of their board members personally. With large national organizations, you might want to check them out before giving: tools like CharityNavigator.org or the Better Business Bureau’s Wise Giving Alliance (Give.org) can help.
You can also do your own research by checking out the organization’s website to find annual reports of their projects and their impact; you may even be able to check financial statements to see what portion of their funds goes for administration rather than direct service. Another useful step might be a web search for the organization along with a word such as “review” or “complaints” or “scams.”
I am one who finds that it “feels good” to give. I can say that it feels even better to give when I know the organization I’m giving to is using my money wisely. For more information, check out this news item from the Iowa Attorney General.
I love the fact that “Giving Tuesday” has become an annual tradition in the U.S. If you have made gifts to charities anytime during 2020, you may be able to take a tax deduction even if you do not normally itemize deductions!
The CARES Act allows people to deduct up to $300 of charitable giving on their federal tax return without using Schedule A, which is the “itemized deduction” form. That’s great news, because even the lowest standard deduction (federal) is more than $12,000; that means that it’s not worth itemizing deductions if your total deductions would be less than that. Due to the special rule for 2020, taxpayers who gave to charity will be able to deduct their charitable gifts up to $300 while ALSO claiming the appropriate standard deduction. Note: the special CARES Act rule applies only to donations of money; donations of goods, such as clothing or household goods donated to Goodwill or Salvation Army, can only be deducted if you itemize.
What to do? if you made monetary gifts to qualified charitable organizations, gather up your receipts and keep them for tax time. Can’t find the receipt? Cash gifts with no receipt cannot be deducted, since there is no evidence of the gift. But gifts made by check can be deducted even without a receipt, as long as they were bona fide gifts and not payment for something. Here are some examples to explain some common mistakes:
- Suppose you and your spouse ate at a spaghetti dinner that was sponsored by a local non-profit for free will donation, and you put $20 in the basket. That $20 is NOT a charitable contribution because you received a meal in exchange for the money you gave.
- Gifts to political or commercial organizations are not tax deductible. The charity should tell you if your gift is tax-deductible, but if in doubt, check the IRS database.
- If you include $30 in a sympathy card after a person’s death, intending it for the charity of the family’s choice, that is NOT tax-deductible, because you don’t know if it was used for charity. However, if you make out a check to a charity in honor of the deceased individual, that is a deductible contribution.
The Internal Revenue Service is the authoritative source for information on charitable contributions and all income tax topics. Click here for information on this special deduction for 2020.