We watch in horror as these natural disasters and the human suffering they bring unfold before our eyes.
And we want to help…
We reach for our cell phones to text a donation to the Red Cross…
Or we reach for our credit card or checkbook to send money where it’s needed.
Not just in the United States but virtually anywhere on the planet.
As an Orange County tax lawyer, I know the tax deduction for charitable donations is almost an afterthought when you’re trying to get funds to charities in an emergency; however, especially if you give a sizable donation, you really need to consider the tax implications.
Americans give approximately $300 billion every year to charity. And about five percent (5%) of that amount is given to international causes like many of the organizations currently helping out in Japan.
Before you write that next check, here’s what you need to think about:
Make Sure the Nonprofit is Registered with the IRS
Global giving is a wonderful thing and technology has made it as easy as giving to the local Girl Scouts. But not all international nonprofits are registered as tax exempt with the Internal Revenue Service.
If they aren’t registered, your donation is not eligible for a tax deduction.
There are a lot of nonprofits registered in the United States that support international relief. And many of them are very well organized and highly effective. If you’re going to give money to an international assistance agency or group, you might as well get the tax deduction for it and know that your money is going to a reputable organization. Some of the better known ones are:
– American Red Cross
– Doctors Without Borders
– Oxfam America
– Global Fund for Women
– Grassroots International
– Development Gap
– Living Goods
– Mercy Corps
If you want to give money and you’re still not sure about the reputation of the organization you’re considering, check out CharityNavigator.com to find out which agencies are working in which areas.
Giving Beyond the Next Emergency
If you want to make a habit of planned giving to philanthropic organizations, you can establish a Charitable Gift Account through a national charitable fund. Sometimes called “donor advised funds”, these charitable accounts are open to anyone who can give $5000 or more. Your contributions to the fund are tax deductible. The funds you contribute are invested and the proceeds are used to make future contributions to organizations you choose.
This type of fund is especially helpful if you want to give to international causes. You can choose charities that are actually based in the United States but do the bulk of their work internationally. Since they are based in the United States, it’s easy to determine if they’re recognized as tax exempt by the IRS and your contributions will be eligible for a tax deduction.
Yet another option for global giving is to give to an intermediary organization like Give to Asia or Rockefeller Philanthropy Advisors. They will charge you a fee for handling your donations but they are very familiar with local charities in the regions you want to donate to so they know who to contact to ensure that your money gets to where it’s needed.
Do Your Homework
Ultimately, the best thing you can do for yourself and the people of the region you want to help is to do your homework.
If you know you want to give but you’re not really sure where the help is needed most (if a natural disaster isn’t making headlines), go to websites like OneWorld or visit the Reuters Foundation. Either of these sites will give you information on the regions with serious humanitarian needs. You can even select the issue you want to research and donate to (i.e., malaria, hunger, AIDs, etc.).
If you’re still confused about the best way to give and receive the tax benefits of charitable donations, give me, your neighborhood Orange County tax lawyer call. We can help you make the best decision for everyone concerned.
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