When it comes down to choosing nonprofits to donate to, there are numerous things to do beforehand to ensure you are donating effectively and confidently. While you will get an income tax deduction, you will need to verify that the nonprofit you choose has received tax-exempt status, otherwise known as 501(c)(3), from the Internal Revenue Service. In this article, we are going to help guide you in utilizing the best resources for determining which nonprofits would be best for you should you choose to donate. Keep reading to learn more!
- Determine Your Cause
There are several different types of nonprofits to dabble in: arts, education, research, environment and animals, health, human services, and more! You will want to determine exactly which type of nonprofit you want to begin contributing to. With each different type of nonprofit comes different rules and regulations. Some great resources and a directory to learn about and browse the different types of categories of nonprofits can be found here and here. These two resources will help you choose a cause and a focus for what you stand for and want to contribute to
- Ask Yourself These Questions
Once you have found the nonprofit you want to donate to, you are going to want to ask yourself some questions before you fully commit.
- Are your goals aligned with this nonprofit’s mission?
- Do you think you will work well with this type of nonprofit?
- Is this nonprofit a 501(c)(3)?
- Have you reviewed their history?
A resource we recommend highly is GuideStar, a complete database with over 1.8 million IRS-recognized organizations that you can properly research and decipher which is best for you and your personal goals.
- Keep an Eye Out for Red Flags
Identifying red flags when determining which nonprofit to choose is a key part of this process. There are several different types of red flags to take note of: leadership, financial, and operations. An example of a leadership red flag would be if the leader of the organization is not fully committed to the organization and its mission. A financial red flag could be along the lines of if the nonprofit organization lacks the ability to find audited financial statements or if their deficit is growing annually. An organization with an operation red flag could be an unclear decision-making process. There are many more red flag examples to be aware of. Refer to more here!
As you can see, choosing a nonprofit to begin contributing to is not just said and done. Researching and verifying nonprofits is a long process, but in the end, it is worth it for the sake of contributing to a great cause and receiving a tax break each year. If you are looking to discuss your options regarding nonprofits and taxes, we would be happy to help you break down process and guide you along the way. Want to get started? Give us a call! (713) 527-8998