Businesses and individuals often worry about risking the state of their finances because of poor decision making, but making the right choice when it comes to charitable donations, is also key.
Charity can be considered a form of investment since it can lead to the greater economic development and mark your company as one that carries the community. It is vital to ensure that your chosen charities are legitimate and dependable, however, and that you avail of the tax breaks you are entitled to.
In this post, we discuss the importance of investing wisely in a cause that means something to you.
Choosing the Right Charity
To see how your chosen charity is spending donations, ask to see their Form 990 declaration, which reveals the percentage spent on running costs, and on investment in the cause, the charity is supporting.
You should also pay close attention to their mission statement; Entrepreneur Jason Sugarman notes that the more detailed the mission statement is, the better.
Topnonprofits.com, meanwhile, states that the best mission statements are clear, concise and useful; that is, they should provide information on the work they carry out and clearly show the focus of their work.
Feel free to request information on specific projects and undertakings over the past few months and ask about the charity’s future plans. It also pays to go with recommended and, if possible local charities, whose work can be instantly measured and gleaned.
Potential Tax Breaks
Generally, you can deduct up to 50% of your adjusted gross income in charitable contributions, so speak to your accountant about how you can make the most of charitable giving. If you have volunteered your time to charity, you can deduct expenses such as parking, tolls, transport, and even airfare, say if the sole purpose of your travel was to raise money for charity.
Noncash gifts can also be deducted, so keep all receipts. For non-cash donations of over $5,000, a certified appraisal will have to be carried out, so you can use this (or the fair market value) during deduction.
If you are a high-income earner, consider a noncash donation such as stocks; this way, you won’t pay taxes on gains, but you will obtain credit for the donation based on the market value of the stocks.
While the reason behind choosing a given charity is usually a wish to improve the lives of specific groups (either through education, care, or improved infrastructure), donations also make sense from an economic point of view.
Choose wisely, going with trusted, recommended charities, preferably those whose work you can see in person. Discuss charity regularly with your accountant, to come up with the best way to ‘kill two birds with one stone.’
So does your business contribute to charities?