6 Things You Need to Know About Giving to Charity

By Michael Stratford

1. Think before you text. From the Japanese earthquake and tsunami to the Joplin, Mo., tornadoes, 2011 has proved to be the costliest year on record for natural disasters across the globe—an estimated $265 billion in the first half of the year alone. In the wake of such devastation, you may feel compelled to act quickly. But you will maximize your gift’s impact if you take the time to research how a charity spends your money.

2. Avoid untested groups. Stick to charities that have a track record for relief work, such as the American Red Cross, Doctors Without Borders and the Salvation Army. Singer Wyclef Jean’s Haiti charity, for example, drew criticism for its lack of infrastructure to help earthquake victims. “Given the nature of disasters, it’s just too much for a new group to jump in and tackle the relief efforts effectively,” says Sandra Mini­utti, of Charity Navigator, which vets charities.

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3. Watch out for scams. The high-profile nature of some disasters makes them prime opportunities for con artists. For instance, up to 60% of the 4,000 charity Web sites that cropped up in the wake of Hurricane Katrina could have been phony. Be especially alert for sound-alike names, newly formed sites and forwarded e-mails claiming to be from disaster victims. Think twice before donating money over the phone, and be wary of outlandish claims. It’s disingenuous for a charity to say that 100% of your donation will go to the victims, because even a credit card transaction carries some administrative cost, says Bennett Weiner, chief operating officer of the BBB Wise Giving Alliance. Most reputable charities spend at least 75% on their programs and serv­ices.

4. Do a little sleuthing. If you feel strongly about where your donation should go, you can earmark the money and ask the charity what happens once the specific need is met. Alternatively, consider making an unrestricted gift and let the professionals prioritize the projects that need funding. If you want to see how well the charity is allocating its money, you can check its IRS Form 990 filings, which most nonprofits are required to make public. GuideStar has a searchable database of those documents.

5. Let the pros do it. There are also several organizations that will do the background checking for you, among them the Better Business Bureau and Charity Navigator. GiveWell has evaluated fewer charities, but it provides an extensive analysis of each one. Donating to international charities can get tricky (and you won’t reap any tax benefits), so stick to U.S.-based charities with an international scope, says Miniutti.

6. Claim a tax break. To deduct your donation, you must itemize your deductions. Then confirm that you are giving to a qualified organization. (You can search for the charity on IRS.gov.) Once you make the donation, keep a record. For contributions of $250 or more, you’ll need written acknowledgment from the charity. You must actually pay your pledge before the end of the year for the donation to count in that tax year; checks and charges to a credit card count even if they don’t clear until after December 31.