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Charitable Donations: Myths and Facts

WebMD looks at common misconceptions about charities and explains the facts.

Few people argue against the need for charitable donations. Yet when it comes to time to donate, it can be difficult to sort through the myths so you can be smart with your charitable contributions. Here is a look at six common myths surrounding charitable giving.

1. My charitable donations are always tax deductible.

Charitable contributions are often tax deductible, but not always. Before you donate money to a particular charity, you should find out if it is registered with the IRS for 501(c)(3) tax-exempt status. You can contact charitable organizations directly or check their status with the IRS either by calling or searching "IRS Publication 78" online.

Many people do not realize that if you receive any goods or services for your charitable contributions, only a portion of your gift will be tax deductible. This often applies if you buy tickets to a charitable event or receive an item like a t-shirt or coffee mug as thanks for your gift. To avoid problems at tax time, be sure to ask how much you can deduct for each of your charitable donations.

2. My charitable gifts are used only for program services (medical research, supplies, etc.).

When you make charitable donations, a portion of your gift is likely to go to the charities’ operating expenses. The percentage that goes to actual program services will vary from one charity to the next. To find out exactly how your charitable contributions will be spent, you should research charitable organizations before giving.

As founder and executive director of Foundation Beyond Belief, an organization designed to support charitable donations, Dale McGowan is well versed in researching charities. Foundation Beyond Belief uses multiple resources to help in their research, but McGowan also recommends contacting charitable organizations directly.

“Charities that have been around for three or more years should have at least one full cycle of audits and annual reports available on their website,” McGowan says. He also advises looking at the whole picture. “High admin costs are not automatically a concern, but high individual salaries relative to the industry norm should be. Look for programs with a clear, stated awareness of the current best practices in their area."

3. Gen X and Gen Y don’t care about charity.

Younger generations are often thought to not care about charitable giving. Yet a recent study by Convio, Edge Research, and Sea Change Strategies, “The Next Generation of American Giving," offers some interesting results about charitable contributions made by four different generations: Generation Y (born 1981-1991), Generation X (born 1965-1980), baby boomers (born 1946-1964) and "matures" (born 1945 or earlier).

While the estimated percentage of giving may be higher among older generations (79% of matures and 67% of baby boomers), 58% of Gen X and 56% of Gen Y do give to charities. Though their average donations are generally smaller, Gen Y and Gen X often have plans to increase their charitable contributions in the following year (31% and 24%, respectively).

The study also reports that younger generations contribute in other ways than direct charitable donations. Gen Y and Gen X are involved with charities in many different ways, including fundraising, online promotion, and volunteering.

4. My charitable donations are not large enough to make a difference.

Charities rely on your support and appreciate donations of any amount. Yet concentrating your charitable contributions can be a more effective way to give. Matthew J. Viola, senior program analyst at Charity Navigator, agrees that both large and small donations are appreciated by not-for-profit charities and recommends donors make a long-term commitment to support charities over time. Viola tells WebMD, “Charity Navigator suggests that instead of donating $10 to 10 charities, a donor should focus on a couple of charities and give each one of those a larger donation ($50 to two charities).”

No matter which charities you choose to support, small gifts from multiple donors add up, and they also provide charities with a broad base of support. This is particularly true when donors continue to give what they can afford year after year. 

5. Causes with active fundraising campaigns need my charitable donations the most.

While there is nothing wrong with supporting well-known causes, like cancer or AIDS research, many lesser-known causes may have an even greater need for charitable contributions. This is especially true when your charitable gifts support medical research, as rare medical conditions and diseases often have less funding.

McGowan often prefers to find deserving charities that support these lesser-known medical needs. “Sometimes the popular vogue does not match the highest need for funding at a given moment,” he says. “Hundreds of millions are funneled into research areas that are already well enough funded, while other critical-need areas are overlooked.”

6. If I donate money to charities, I will be put on several mailing lists.

Before making charitable contributions, ask organizations about their donor privacy policies. Some charities sell your contact information to mailing lists, and others do not. Charitable organizations may also offer a way for you to “opt-out” of receiving additional mailings.

To keep from being added to mailing lists, look for charities that offer written privacy policies and read the terms.  Many charities are happy to protect their donors’ private information.

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