Series: Spending Money

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Charities: Lead with your Head Terms of Use:

You can choose to put money to work for you in many different ways. Money can also be shared with others to help those in need.

When the twin towers of the World Trade Center collapsed in the terrible terrorist attack of September 11, 2001, Americans responded by giving money. People gave $927 million to the Red Cross, $330 million to the United Way, and another $140 million to the families of fire fighters.

The American Society for the Prevention of Cruelty to Animals raised an amazing $140 million for animal victims and to provide pet therapy. All together, Americans gave over $2 billion to help those in this tragedy.

The act of giving and helping 9/11 victims made Americans feel better and empowered during this tragic time.

But Americans have always given a lot to charities – on average: $200 billion every year. The average American family gives 6.5% of its income to charity (organizations that help others).

Our government allows us to write off donations on our income tax returns. Here are a few of the tax rules that you must follow in order to take charitable deductions:

1. You can only deduct 30% to 50% of your Annual Gross Income.

2. The charity must be a non-profit classified as a 501 (c) (3) by the Internal Revenue Service. Such organizations are public parks, non-profit schools, federal, state or local governments, religions, as well as charities like the Boy Scouts and United Negro College Fund.

3. The organizations should sign a certificate for an IRS tax exemption when you contribute.

4. You can write off the “fair market value” (the amount the item would sell for today) of used items like clothing or cars. See IRS Publication 526's section on fair market value or call 800-TAX-FORM. You’d use “Blue Book” values for cars in most cases.

Series: Spending Money

Page 2 of 2

Charities: Lead with your Head Terms of Use:

5. You can’t write off contributions to political groups or candidates, labor unions, foreign charities, sports and social clubs, or tuitions, among other things.

For more information and to download Publication 78, go to the IRS website.

There are about 360,000 new charities starting each year, and unfortunately many are scams. Some use names like familiar charities.

For example, the American Cancer Aid Foundation sounds a lot like The American Cancer Society, which raises almost $1 billion a year and has excellent ratings with the Better Business Bureau (BBB). In contrast, the American Cancer Aid Society has never filed a report with the BBB and has no tax status.

As a general rule, never give to a charity over the phone, especially by credit card number. Instead ask the phone solicitor to mail you printed information so you can check them out.

All sorts of groups are advertising for your unwanted old car or truck.

Before you hand over the keys, make certain you know who you’re dealing with, otherwise you may end up giving it to a charity that doesn’t get much benefit. Most charities sell the vehicles at auction, but others use a middleman to sell them who ends up with most of the profit.

While some groups want money, household items or food, consider donating your time, too. There are lots of volunteer opportunities to choose from and you can find out about them by logging on to VolunteerMatch.

To check out a charity, go to the BBB’s Wise Giving Alliance website. They also check to make sure the organization effectively uses the funds it gets.

The Charity Navigator rates thousands of charities from one to four stars.

GuideStar lets you verify a nonprofit's legitimacy, learn whether a contribution will be tax deductible, view a nonprofit's recent Form 990, or find out more about its mission, programs and finances. 

For complete information on how to detect charity scams and where to report them, go to the FTC site or call toll-free 1-877-FTC-HELP (1-877-382-4357).

See what you learned.

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