NDSU Extension - Mercer County


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Choose Your Charities Carefully

charities, charitable giving

Submitted by Dena Kemmet, Extension Agent/Family and Consumer Science

The end of the year means we usually see an increase in requests for charitable giving. You may get mailings or phone calls from organizations that sound like they do good things, but they may not be legitimate. Ultimately what you want is your donation to both benefit others and provide you with a tax deduction. How can you be sure your money is used wisely?

First, for every dollar donated only a percentage is used to fund programs. Much of your money is used for fundraising and administrative costs. The lower the percentage going to overhead, the higher the funds going toward programming. For example, one charity devotes 89% of its donations to programming and only 11% to administrative costs.

At the heart of a good charity is a board of directors that has the independence it needs to put the charity’s best interests above any competing interests or personal gain. Another thing to remember when considering charities is how much the CEO is paid. For example, the median (mid-point) salary of CEOs of charities rated by Charity Navigator is $150,000. If a CEO is paid less than this, you may want to put that charity higher on your giving list since their administrative overhead is likely to be lower.

Another thing to consider is an organization’s tax-exempt status. Many smaller organizations will represent themselves as a qualified charitable organization, but have not kept their non-profit status up-to-date. If you are unsure whether your desired charity has kept their records up-to-date, you can check the IRS website for a full list of qualified organizations: www.irs.gov/charities-non-profits/organizations-eligible-to-receive-tax-deductible-charitable-contributions

Cash donations of $250 or more require a written receipt from the charitable organization in addition to your canceled check. Ask whether you will receive the required confirmation or limit your donation to less than $250.

North Dakota allows a sizable income tax credit of 40% of a charitable donation greater than $5,000 through cash or a deferred gift to a qualified endowment fund of a nonprofit organization. This tax credit is available to North Dakota residents and businesses.

A 'qualified endowment fund' is defined as an irrevocable fund held by a North Dakota organization or bank/financial institution on behalf of a qualified organization. Only the interest and appreciation can be used by the charitable organization. While a charitable deduction reduces the amount of income subject to taxation, the tax credit is a dollar for dollar reduction in your tax liability. It is subject to an annual limitation of $10,000 per business or individual and $20,000 for a couple. My favorite example of a worthy endowment fund is the North Dakota 4-H Foundation.

Before writing donation checks, do your homework to insure your contribution is doing the best for the most people.  Here are three websites that can help you assess potential charities:

Charity Navigator:   http://www.charitynavigator.org/

Better Business Bureau Wise Giving Alliance:  http://give.org/

Charity Watch: https://www.charitywatch.org

Sources:  Charity Watch, Charity Navigator, and Accounting Solutions Weekly Tax Tip


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