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Even if a group supports the right cause, there are a number of questions you should ask before you donate your hard-earned dollars to it. They include: How much do I know about this group? Am I confident that it is a legitimate organization that will use my money to benefit the cause it’s espousing? Am I sure that the group will not sell my name and contact information to telemarketers?
For more information, look over the organization’s financial statements and consider turning to sources such as Charity Navigator, which provides free ratings on a wide variety of charities.
Some donors are disappointed to find out how their money is used, with a large amount going to administrative and other expenses rather than to support the cause. Of course, all charitable organizations will have to cover administrative costs to keep operating and pay salaries that attract talented people who can help them achieve their mission.
CharityWatch, which also rates charitable organization, recommends that 60 percent of a donation should go to program services, with the rest spent on fundraising and general administration. Keep in mind, though, that the numbers don’t always tell the full story. If you have a question about how a group spends its money or how well it meets its goals, don’t hesitate to contact them and ask for some perspective.
Did you spend $200 to attend a charity dinner? If the value of the dinner you received was $75, then you can only deduct $125 for your donation. You must subtract the value of any benefit you receive from a donation before deducting it on your tax return.
Remember, too, that no donation is deductible unless you itemize your deductions on your tax return and unless you give to a qualified organization in the eyes of the Internal Revenue Service. IRS Publication 526, Charitable Contributions, offers more details.
Have more questions about the best ways to spend your money? Your local CPA can offer the advice you need. Turn to him or her for with all your financial questions.
Copyright 2012 American Institute of Certified Public Accountants.