Key Takeaways:
Focus your giving on the causes that matter most to you instead of spreading limited dollars too thin.
Protect both your impact and your tax benefits by giving directly to verified 501(c)(3) organizations and doing a quick credibility check before donating.
A simple year-round plan—rather than last-minute, emotion-driven gifts—can reduce waste, avoid scams, and help your charitable dollars go further.
Americans continue to give generously. In 2024, charitable donations in the U.S. reached an estimated $592.50 billion, up 6.3% in current dollars.
In 2023, individuals accounted for an estimated $374.40 billion. Foundations added an estimated $103.53 billion, while another $42.68 billion was given by bequest, according to givingusa.org.
We tend to think about charitable donations around the holidays. It’s year-end, and your gift to a charity may be sparked not only by your desire to help others, but by tax planning strategies.
Starting soon, even taxpayers who don’t itemize will be able to deduct charitable gifts — up to $1,000 (single) or $2,000 (married filing jointly) — above the standard deduction.
But let’s not forget that your gifts will not qualify for a tax deduction unless they are received by a tax-exempt organization, as defined by section 501(c)(3) of the Internal Revenue Code. For example, making donations to a personal fundraiser through GoFundMe is growing increasingly common, but they are not tax-deductible.
Charitable Giving Mistakes to Avoid
While ensuring your gift is tax-deductible is one challenge, there are others you’ll need to navigate, too. Let’s review seven potential potholes to avoid when it comes to charitable giving.
Spreading limited dollars over too many causes
I call this "Trying to butter everyone's bread." There are plenty of worthy charities. However, might it be a good idea to concentrate your limited resources on causes you are most passionate about? Here are some ideas. You might consider educational charities, culture and the arts, health, and organizations that look for treatments and cures for diseases, charities that benefit animals or the environment, your church or place of worship, human services, international relief, or organizations that support the poor in your community. The choices are almost limitless. Your resources are not.
Not getting the best return
You've found charities that meet your criteria. For many, we want the best return on our dollar.
We want our cash to be spent and invested wisely, not frittered away by large administrative costs. According to CharityWatch, "Ask how much of your donation goes for general administration and fundraising expenses and how much is left for the program services you want to support. Most highly efficient charities spend 75% or more on programs.
Keep in mind that newer groups and those that are working on less popular issues may find it necessary to spend a greater percentage on fundraising and administrative costs than well-established, popular groups." According to Smart Asset, which reviewed a report by the Tampa Bay Times and The Center for Investigative Reporting, 50 charities collected more than $1.35 billion in donations. Yet, $970 million went not to worthy recipients, but to the people who collected the money. You desire to support your cause, not enrich the fundraisers. A small effort on your part, i.e., “kicking the tires” of the charity, will go a long way.
There are several charity watchdogs you can find online. Do your homework. You may find your decision reinforced by what you find. Or you may decide to steer clear of a particular organization based on your research.
Not giving directly to charities
Give directly to the charity and avoid solicitors. The middleman gets paid to raise funds. That’s a haircut on your donation you will want to avoid.
Falling for emotional appeals
This is tricky and difficult. We want to help. We feel good about ourselves when we share our blessings with others who are less fortunate. It's part of who we are.
Emotional appeals pull at our heartstrings. No one, including myself, is immune to what appear to be worthy charities.
Just be careful. You may want to concentrate on causes that have special meaning to you. Furthermore, be careful about what might be called the flavor of the month.
For instance, when a disaster occurs, there are reputable outfits we are all familiar with. Sadly, fraudsters can also play on our desire to help. Donate here, and little if any money will make its way to those suffering from a natural disaster. Instead, your funds may simply line the pockets of scammers.
Waiting until the last minute
Many nonprofits get a big chunk of cash at year-end. If possible, you can set up monthly payments that help even out the cash flow of these organizations, making it easier on their budgets—and your finances.
Giving small donations
Ten dollars is ten dollars, and plenty of ten-dollar donations will add up, but processing costs for the charity are high. Besides, if you give once, you’ll probably be inundated by requests that raise a nonprofit’s costs, diluting the impact of your one-time gift.
Not developing a strategy
As I’ve said, we are tempted to respond when we hear a well-crafted message. Sometimes, it is a worthy cause. Our desire to help is admirable, and it speaks volumes about who we are, but be careful about exhausting limited finances and reducing donations to causes you care about the most.
I trust you've found this review to be educational and informative. Let me emphasize that it is my job to assist you. If you have any questions or would like to discuss our wealth management services, please feel free to contact us.
As always, I'm honored and humbled that you have given me the opportunity to serve as your financial advisor.
John Gigliello, CFP®
John Gigliello, CFP®, is a fee-based fiduciary financial planner in Albany, NY, serving individuals age 50+ with comprehensive planning and investment management, centered around proactive and advanced tax planning. John earned a Certificate in Financial Planning from Boston University and, more recently, successfully completed the rigorous CFP® Certification examination to become a CERTIFIED FINANCIAL PLANNER™. John earned the Accredited Investment Fiduciary® Designation from the Center for Fiduciary Studies®, the standards-setting body for Fi360. The AIF® designation signifies specialized knowledge of fiduciary responsibility and the ability to implement policies and procedures that meet a defined standard of care. John currently serves on the Albany County Investment Advisory Board, having been appointed by a unanimous vote of the County Legislature in January 2019. In this position, John advises the county on a strategy for making the best use of money available for investment.