Charitable Contributions: How To Give Wisely

Since charities ask for larger and more frequent donations from the public these days, soliciting by mail, telephone, television, and radio, for example, they should be checked out before you donate money or time. Here are some tips on how to maximize your charity dollar and avoid scams.

Here are some basic, common-sense suggestions for avoiding rip-offs in making charitable contributions:

Related Guide: Please see the Financial Guide: FRAUDULENT CHARITIES: How To Protect Yourself.

Tip: You should, of course, keep receipts, canceled checks and bank statements so you will have records of your charitable giving at tax time.


Volunteering your time can be personally rewarding, but it is important to consider the following factors before committing yourself:

Tip: Although the value of your time as a volunteer is not deductible, out-of-pocket expenses (including transportation costs) are generally deductible.


Many charities use direct mail to raise funds. While the overwhelming majority of these appeals are accurate and truthful, be aware of the following:

Caution: Deceptive-invoice appeals are most often aimed at businesses, not individuals. If you receive one of these, contact your local Better Business Bureau.


If you respond to mail appeals, you should be aware that certain charities consider this to be a significant part of their educational budgets. In a recent survey, half of 150 well-known national charities included their direct mail and other fund-raising appeals in their public education programs. This practice makes fund-raising drives look like a smaller part of a charity’s expenses than they are. These 75 charities allocated $160 million of their direct mail and other appeal costs to public education programs.

Example: A charity whose purpose is to combat cruelty to animals uses direct mail to raise funds. The cost of a nationwide direct mail campaign is $1 million much more than the $200,000 the charity has budgeted for its program of research grants. This embarrassingly high allotment for fund-raising costs can be significantly reduced if the direct mail pieces include some information about cruelty to animals. Since the information is considered educational, the charity calls it a program expense and allots half the cost of the mailing to public education, thus reducing fund-raising expenses from $1 million to only $500,000, and bumping up program spending from $200,000 to $700,000.

The line between pure fund-raising and genuine public education activities is not always clear. However, if the charity is confident that the fund-raising appeal truly serves its educational purposes, it should be willing to disclose this fact in the appeal. This disclosure allows donors to make an informed decision about whether to support the activity.


When you are approached for a contribution of time or money, ask questions – and do not give until you are satisfied with the answers. Charities with nothing to hide will encourage your interest. Be wary of any reluctance to answer reasonable questions.

Caution: Contributions to tax-exempt organizations are not always tax-deductible.

Caution: Registration, by itself, does not mean that the state or local government endorses the charity.


Sweepstakes mailings, used by businesses for many years to promote their products, have recently become popular with charities. Here are some points to consider when reviewing a sweepstakes appeal.

Caution: For a national campaign, the probability of winning the big prize may be quite low. Some campaigns involve mailings of a half-million to ten million or more letters.

Caution: If you are considering a donation, check out the appeal as you would any other request for funds. Does it clearly specify the programs your gift would be supporting? Do not hesitate to ask for more information on the charity’s finances and activities.


Since all charity thrift stores do not necessarily operate the same way, it is important to find out if the charity is benefiting from thrift sales. There are three major types of thrift store operations:

Tip: The fair market value of goods donated to a thrift store is deductible as a charitable donation, as long as the store is operated by a charity. To determine the fair market value, visit a thrift store and check the going rate for comparable items. If you are donating directly to a for-profit thrift store or if your merchandise is sold on a consignment basis whereby you get a percentage of the sale, the thrift contribution is not deductible.

Tip: Remember to ask for a receipt that is properly authorized by the charity. It is up to the donor to set a value on the donated item.

Caution: If you plan to donate a large or unusual item, check with the charity first to determine if it is acceptable.

If you are approached to donate goods for thrift purposes, ask how the charity will benefit financially. If the goods will be sold by the charity to a third party such as an independently managed thrift store, then ask what the charity’s share will be.

Tip: Sometimes the charity receives a small percentage, e.g., 5 to 20 percent of the gross or a flat fee per bag of goods collected.


Dinners, luncheons, galas, tournaments, circuses, and other events are often put on by charities to raise funds. Here are some points to consider before deciding to participate in such events.

Tip: If you decide not to use the tickets, give them back to the charity. In order to be able to deduct the full amount paid, you must either refuse to accept the tickets or return them to the charitable organization. In this way, you will not have received value for your payment.

Caution: Make donations by check or money order out to the full name of the charity and not to the sponsoring show company or to an individual who may be collecting donations in person.

Tip: Ask the charity what anticipated portion of the purchase price will benefit the organization.

Caution: It has happened that the number of children eligible to receive free tickets has been limited or transportation has not been arranged. So, in effect, free tickets given to the few needy children who attend the event are paid for many times over by businesses and individuals who purchase tickets.


You may receive an offer to apply for an affinity credit card bearing the name and logo of a particular charity. Sometimes offered exclusively to an organization’s donors or members, these cards are issued by banks and credit card companies under agreements worked out with individual charities. These cards are just like other credit cards, but the specified charity gets some kind of financial benefit.

All affinity credit cards are not created equal. Offers vary in terms of how the charity benefits as well as the terms of the credit agreement with consumers. So check the terms carefully!

Caution: Consider the specific terms as you would any credit card offer: the amount of the interest rate/finance charges, the amount of the annual fee, if any, the amount of late fees and over-the-limit fees, if any, and the length of the grace period, or amount of time after which finance charges begin to accrue on any unpaid balance.

The charity usually receives a benefit in one or more of the following ways:

Caution: Make sure the promotional literature states exactly how the charity benefits. For example, one affinity card offer declared that a specified national charity would receive half of one percent of all transactions made with the card (that works out to 5 cents for every $10 worth of purchases). If the financial benefit for the charity is not spelled out, then ask.

Caution: Contributions made by a bank and/or credit card company through the use of an affinity credit card are not deductible to consumers as charitable donations for federal income tax purposes.

Remember also to consider your interest in the charity and not to hesitate to seek out more information on the charity’s programs and finances.

Tip: If saving money is your bottom line, make a direct donation to the charity and seek a credit card with the best terms and lowest interest rates, regardless of affinity.


The following points should be kept in mind when considering promotions that partner charities and businesses:

  1. Charity/business marketing campaigns should clearly disclose the actual or estimated portion of the purchase price that will benefit the specified cause. Without such information, you cannot know how much of your purchase will aid a charity participating in such a campaign.
  2. Read the disclosure carefully. Some charity/business marketing campaigns have an expiration period (for example, ten cents goes to the charity for all purchases made until October 31.) If there is no disclosure, be aware that the amount that goes to the charity is usually between one and ten percent of the retail price.
  3. In schemes during the Gulf War, businesses made no arrangements with the named charity and no contributions were given. Various items and services were sold with the false promise that a donation would be made to the USO or other organizations helping members of the armed services or their families. Similar advertising abuses commonly occur in the wake of hurricanes, floods and other natural disasters.
  4. Some advertisements falsely imply the existence of a direct connection between the consumers’ purchase and the charity when, in fact, the charity was guaranteed a “flat” contribution regardless of the level of the resulting purchases.


The tragedy of a flood, massive fire, hurricane, earthquake, or another disaster always triggers an outpouring of public support and concern. During such crises, watch out for fraudulent appeals by some who see disasters as an opportunity to take advantage of American concern and generosity.

Examine your options instead of giving to the first charity from which you receive an appeal. There will be a variety of relief efforts responding to the diverse needs of disaster victims. Be wary of appeals that are long on emotion and short on what the charity will do to address the specific disaster.

Caution: Ask how much of your gift will be used for the crisis and how much will go towards other programs and to administrative and fund-raising costs. And find out what the charity intends to do with any excess contributions remaining after the crisis has ended.

Check with organizations before donating goods for overseas disaster relief. Most groups involved in overseas relief will not accept donated goods since purchasing goods overseas is often less expensive and more efficient. If a charity accepts donated items, ask about their arrangements for shipping and distribution.

Some charities change their program focus during a crisis in order to respond to the changing needs of disaster victims. Do not assume the charity will carry out the same activities throughout a crisis situation.


In reviewing such appeals, potential donors should be aware of the following points.



Not all sponsorship programs are alike. Sponsored donations usually benefit a project for an entire community (for example, medical care, education, food) and not the sponsored child exclusively. Some groups believe this is the most effective way to make significant and lasting changes in a child’s living conditions. Other organizations do give a certain amount of the contribution directly to the sponsored child. Before deciding to participate in a sponsorship program, you may want to consider the following:

Tip: Contact other child sponsors to get a sense of their overall satisfaction with the organization.


While some organizations are a single entity under one name, others may be a network of local affiliates or chapters. If you give to a local chapter or affiliate, do not assume your donation will be spent locally. Nor should you assume that a chapter’s operations are fully controlled by the national office.

Many different types of relationships can exist between a charity’s national office and its chapters. Here are three possible relationships chapters:

  1. The national office performs certain functions, such as developing educational or fund-raising materials but does not supervise affiliates. In this case, the local chapters are incorporated separately from the national office and each applies for its own tax-exempt status from the IRS. Each local chapter’s programs and fund-raising is under the control of the chapter’s local board of directors. To support the national office, the local affiliates purchase materials produced by it or send it a small percentage of their locally collected funds.
  2. The organization’s national office and affiliates function as one centralized unit under the control of a national board of directors. All income and expenses are channeled through the national office. In this case, the chapters are not separate legal entities and have only limited authority, as stated in their charter agreements with the national office.
  3. Most national/chapter relationships fall somewhere between the two extremes in the preceding two paragraphs. In such a case, both the national office and the local affiliates share some level of authority. Local chapters may or may not be separately incorporated, but all have their own governing boards, some of which share control with the national office. The charity may have statewide affiliates that perform functions at the state level. With this structure, there is usually a fund sharing or dues formula between the local affiliates and the national office.

Caution: The bottom line for you is that, depending on the organization’s structure, the local affiliate may carry out different activities from those of the national office. It is important to inquire about this difference. In addition, donors may want to identify how much of a local affiliate’s contributions are spent on local programs.

Caution: When considering a donation to a local chapter, it is wise to check out the chapter separately.