DECEMBER 2005 :: CONSUMER ED

'Tis the Season for Giving
Make a Difference With Your Money by Donating to Charity

By Karen Blumenthal
Staff Reporter of The Wall Street Journal

Since the school year started, I have purchased gift wrap, coffee beans, a giant coupon book and a poinsettia, all to support local school groups, and I've driven through at least two high-school car washes raising money to support hurricane victims.

Obviously, there are lots of ways to support your community. But none of those are quite the same as a decision to make a real cash donation to a charity. A charitable contribution isn't just a larger donation than you might give for a fund-raising solicitation. It's crucial to supporting important causes in our communities, since most charities rely heavily on the generosity of individuals. A donation is also a sign of your financial independence, your ability to show what's important to you by deciding how to use your money.

In one form or another, giving is a basic part of most family budgets. The Giving USA Foundation estimates that 70% to 80% of Americans make at least one donation a year to a nonprofit. Individuals last year donated about $188 billion, providing financial support to churches and temples, schools, homeless shelters and food banks, orchestras and museums, hospitals and medical research and a host of other beneficial services. That translates to nearly $650 for every person in the U.S.

You can't be too young to get started-or to bask in the glow of sharing your cash to help your world. The size of the donation doesn't really mater. The American Red Cross and the Salvation Army, for example, are happy to receive a dollar or 10 if that's what you can afford. But making sure your hard-earned money is put to good use can take a little advance planning and research. Here are some things to consider before you make a donation:

Paper or plastic? If at all possible, avoid cash donations. Write a check (or ask your parents to write one in exchange for your cash) or make your donations with a credit or debit card. That way you'll have a record of your gift and you can be sure it gets to the right place.

Local or national? If your gift is relatively small, you may find your dollars are more meaningful-to you and the charity-if you spend them close to home. When I was in high school, my friends and I enjoyed summer outings to see Shakespeare plays in an outdoor amphitheater free of charge. I was so taken by the experience that I joined the Shakespeare Festival of Dallas, making it my first real charitable donation. My small contribution was welcomed by this little nonprofit group, and it gave me a thrill to support something that I cared about.

A little or a lot? If you have an idea how much you want to spend in a given year, consider how best to divide it. Say you're willing to donate $100. It's tempting to give $10 to a number of charities. But you'll make more of a splash if you pick four groups that really matter to you and give them each $25.

Be prepared to become pop-u-lar. Once you give to a big charity, you may find your mailbox full of requests for money from all kinds of groups, because mailing lists are frequently exchanged among nonprofits. Feel free to toss these solicitations-even if they include stickers, greeting cards or other goodies. You don't owe a charity anything for items that you didn't order. I find I have to keep careful track of my donations or I may unwittingly respond to a mail request and send a group more donations in a year than I want to.

Follow the money. Since charities are entitled to tax exemptions, the government requires these groups to be open about how they use their money. As a donor, you have a right to know how much of your money will actually go to provide services and how much will go to management, mailings and other overhead costs. Even if you're buying band candy, tickets or Girl Scout cookies, you have the right to know how much will actually go to the group. Every group has some costs, of course, but the amount that is actually spent on the charity's focus can vary widely.

For bigger charities, Web sites like www.give.org and www.charitynavigator.org can give you more detail about the organization and how it spends its money. These sites also may help you tell the difference between the many groups with similar names that collect money for, say, cancer research or diabetes.

A quick Internet search of a charity also can help you figure out if the group is for real. After Hurricane Katrina devastated the Gulf Coast, people rushed to help out. But, "the first charity you hear about may not be the best one for you," says Bennett Weiner, chief operating officer of the BBB Wise Giving Alliance, an affiliate of the Council of Better Business Bureaus. A few bogus Web sites popped up promising to offer aid or purporting to link to real charities. Rather than relying on links, it's best to go to the charity's site yourself to make a donation.

Tax matters. The government encourages people to make charitable contributions by making donations tax-deductible. That is, millions of taxpayers can deduct the value of their contributions on their tax returns, and thus owe less in taxes. But there are complex limits, and you should be aware that not all contributions are tax-deductible. If you get something in return for your gift, such as a free dinner or football tickets, you typically can deduct only the amount of your donation minus the cost of the dinner or tickets. Donations to political candidates, labor unions and social clubs also can't be deducted. Neither can donations you make directly to a single individual, such as someone in need of medical care.

Also, many people can't deduct any charitable gifts because they choose what's known as the standard deduction, a flat deduction amount based on their filing status. About two-thirds of all taxpayers claim the standard deduction and thus can't deduct their charitable donations.

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