Thinking of giving to a campaign on GoFundMe or other crowdfunding platform? Before you do, think twice. While there are people and causes you might want to help, it’s important to ask two primary questions: Are these funds going to a legitimate charitable request, and can I take my donation as a tax deduction?
No doubt you’ve read about the homeless vet who gave his last $20 to help a stranded young lady buy a tank of gas. Turns out it was all a hoax. Fortunately, the thousands who contributed will receive full refunds from GoFundMe. But this is rare. Online fundraisers are not subject to regulations or financial reporting requirements, so you can never be quite sure how the money will be used unless you personally know the recipient.
You’ll get a receipt when you donate via crowdfunding, but your donation is only tax deductible if the entity is a 501(c)(3). How to be sure? Ask for paperwork, or check on the Guidestar directory at www.guidestar.org.
If you own stock that has appreciated and have held it for more than a year, consider donating it to your favorite charity. This has a double benefit. You can claim the fair market value of the stock as your contribution amount and you won’t have to claim the capital gain on the appreciation of your investment.
If you’re 70 1/2 and have to take required minimum distributions, consider donating the distribution directly to a charity and it won’t be considered income to you. To do this, the distribution must go directly from your IRA to the charity. This can only be done through an IRA, not 401(k)s or other retirement plans.
In all cases, remember that charitable donations will only be claimed by those whose itemized deductions exceed the new standard deduction threshold ($12,000 for single taxpayers, $24,000 for married filing jointly) under the Tax Cuts and Jobs Act.
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