How To Give Wisely to Charity in 2024

When the year grows to a close and Giving Tuesday approaches (it's on December 3 in 2024), many of us begin thinking more about making charitable contributions. Problem is, we often take what Stephanie Buckley characterizes as a peanut butter approach.

"Most of the time people want to give, they don't have a philosophy or discipline around how they give," notes Buckley, head of philanthropic services at Wells Fargo. "It's usually: 'My goddaughter asked me for money to support her school fundraiser.' Or 'My religious institution needs some money, so I'm donating there.' There's no overall plan."

That leads to blithely spreading generosity around like peanut butter. "People want to be thoughtful, they just don't know how to do it," Buckley says.

If people have financial advisors, the money pros often fail to discuss wise charitable giving techniques with them. Close to half of pre-retirees and retirees with advisors have never had a conversation with them about charitable planning or giving, according to a Fidelity Charitable survey.

Getting strategic about your charitable giving can be helpful to both you and the needy who would benefit from your support. The Friends Talk Money podcast I co-host has a new episode on how to give wisely to charity.

Here's how to do it:

Americans gave 1.9% of their disposable income to charity in 2023, according to Giving USA. You may want to give more — or less — this year.

Experts say it's helpful to come up with a ballpark figure, starting with donations you've already made in 2024, so you can determine how to divvy up the rest of your donations before January.

Since the U.S. stock market has risen roughly 20% in 2024, if you've been in it, you may be able to take some profits to make a bigger donation than in 2023.

Buckley says one way to begin donating wisely is by creating a personal giving spreadsheet listing the names of all the charities you assisted in each of the past five years and how much you donated each year.

"Often, when our clients do this, they're like, 'Wow, I want to support dog shelters, but I'm giving most of my money to education' or vice versa," she says.

The spreadsheet, she adds, can also give you a chance to decide whether the charities you've supported are still ones you want to help.

Giving Compass, a donor advisory nonprofit focused on impact-driven philanthropy, has a free online Giving Planner tool with a calculator comparing your giving to others like you.

The next step for giving wisely is determining where to donate.

You might begin by contributing to a nonprofit where you volunteer or are a member. That's because you know how effective the group is and how well it's run, says Amy Pirozzolo, head of donor engagement at Fidelity Charitable, in Raleigh-Durham, North Carolina.

Otherwise, launch your research by zeroing in on the missions that matter most to you and finding efficient charities making an impact.

Fidelity Charitable's "Boost Your Giving IQ" online booklet lets you make a philanthropic mission statement, map out a giving plan and research charities.

If you want to give more than $10,000 to charity this year, you could sign up with GiveTeam for a Zoom session with one of its experts. They'll work with you to develop a charitable mission statement and amass information about nonprofits aligned with your priorities.

One way to make a bigger impact with your charitable contributions is by donating through a giving circle, says Pirozzolo. That's where a group of like-minded people agrees on charities to assist and members pool their money (as little as $10 a month per person) to make bigger gifts than they could individually.

"I'm actually part of a Giving Circle," says Pirozzolo. "It's about 100 women and we give a total of $100,000 to Wake County (North Carolina) nonprofits every year."

There are more than 4,000 giving circles; the Giving Compass site has a Giving Circle search tool to find ones near you focused on missions of interest.

If you know names of charities where you might want to donate but aren't sure whether they deserve your money, Fidelity Charitable suggests asking them questions like:

• What's your most successful program and why?

• Where does most of your funding come from?

• What are your most urgent needs?

• What are the best ways for me to learn more about your organization?

Don't look for a specific minimum percentage of revenue that a charity is allocating to programs. Charities use different measurements and sometimes employ accounting tricks to artificially boost their numbers.

"Charities can hire for-profit, professional fundraising companies to make telemarketing calls asking for donations. As long as they include some sort of action step that they can consider educational, they can report most of the money spent on that fundraising as a program expense," says Laurie Styron, CEO of the CharityWatch rating service.

But if a charity's percentage of revenue spent on programs is very low — like 30% — "I would use that as a red flag that something's not right," says Michael Thatcher, CEO of the Charity Navigator rating service.

Independent rating services can help you assess particular charities:

Charity Navigator, the biggest, rates over 235,000 charities on a zero to four star scale. Four stars means the charity is likely to be highly effective and "exceeds or meets best practices and industry standards across almost all areas."

But Charity Navigator has impact assessments on only about 2,200 charities because, Thatcher says, measuring impact is the hardest thing to do when evaluating nonprofits.

Charity Navigator also now offers Causeway Funds where you choose among six causes (hunger, homelessness, animal welfare, global health, global poverty and education) and donate to a curated group of five to eight highly-rated charities with that mission.

CharityWatch rates about 670 large charities on an A+ to F scale; roughly 200 organizations are on its Top-Rated Charities list.

Quite a few veterans' and police charities get Fs from CharityWatch. "You have to be particularly careful about emotionally charged causes," says Styron. They are trying to elicit an emotional response, she adds.

Give.org, the Better Business Bureau's Wise Giving Alliance, tries to verify the trustworthiness of roughly 11,000 charities based on 20 standards for charity accountability. The ones meeting all 20 standards are called BBB Accredited Charities.

Give Well, focused on effective altruism, looks at how much good a program accomplishes per dollar spent and has a very small number of recommended charities.

GuideStar is a database of over 1.8 million nonprofits, not an assessment of their quality. Charities can earn one of its annual Seals of Transparency — Bronze, for providing basic information; Silver, for also sharing program information; Gold, for also uploading financial details and Platinum, for also sharing its strategic plan, progress and results.

Experts recommend looking for charities that rate well on more than one of the sites. One way to find them is by doing an AI search asking for charities serving a particular mission that are rated highly by CharityWatch, Charity Navigator and Give.org and have Gold or Platinum seals from GuideStar.

There are several ways to give to charity and reduce your taxes, though it's harder to write off a donation than it used to be. That's because the threshold for itemizing deductions is now so high. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.

If you think the donations you plan to make won't be large enough to exceed the standard deduction, you may want to use the bunching tax strategy. It means combining two years' worth of planned deductions into one, so the total will be high enough to let you itemize that year.

You generally won't be able to claim a GoFundMe donation to a personal fundraiser, Buckley says, since the Internal Revenue Service won't consider the recipient to be a charity.

Another tax-saving strategy for charitable giving is donating stocks, ETFs and mutual funds you've held for more than a year. You can then avoid owing capital gains taxes on their profits.

Donor-advised funds from financial services firms like Schwab, Fidelity and Vanguard are another technique, though many people aren't familiar with them. In the Fidelity Charitable survey, only 21% of people aged 50 to 80 whose households donate $500 or more per year were aware of donor-advised funds.

When you contribute cash, stocks, mutual funds or ETFs to a donor-advised fund, you get an immediate tax deduction (if you itemize) and can invest the money for tax-free growth until deciding which charities will receive your grant donations. You'll also avoid owing capital gains taxes on appreciated assets you give to a donor-advised fund.

"I call the donor-advised fund the Swiss army knife of philanthropy," says Buckley. "It's so versatile and often gives people the best tax benefits."

Once reserved for the wealthy, donor-advised funds now typically have no minimums to open and low fees. Because their accounts provide an online record of every contribution you make, they're an easy way to keep track of donations.

You can also arrange for repeated, periodic grants from your donor-advised fund to particular charities for automatic giving.

"Once you have set up a donor-advised fund, it makes your giving a lot more organized and streamlined," says Mitch Stein, head of strategy at Chariot, a donor-advised fund payment network.

Chariot's DAFPay app and the Daffy app offer quick and clever ways to make donor-advised fund contributions.

With DAFPay, if you've set up a donor-advised fund and want to contribute to someone's Walk to End Alzheimer's fundraiser campaign, say, you click on the DAFPay button on their fundraiser. Then, the amount you'll give gets taken out of your donor-advised fund and transferred there.

The Daffy nonprofit is like the donor-advised fund equivalent of a tax-sheltered 529 college savings plan.

For $3 a month, Daffy lets you make tax-favored donations — including recurring ones — of cash, stock, ETFs, mutual funds or crypto through its own donor-advised fund. Money in your account is invested in the Daffy portfolio you choose until you move it to a charity.

"Most nonprofits don't have the ability to take things like stock or mutual funds or ETFs, let alone crypto," says Daffy CEO and co-founder Adam Nash.

One caution about using donor-advised funds: Be sure the charity you select to receive your grant is the one you intend. Charities can have similar sounding names or multiple local affiliates across the country.

"If you're confused, go to the organization's website and look for their Tax Identification Number," says Pirozzolo. "Then, you can type that number into the donor-advised fund's system and it will pull up the charity."

Another tax-saving way to give wisely, for people aged 70½ or older, is a qualified charitable distribution from an Individual Retirement Account (IRA).

You make this distribution directly to a charity, reducing the amount of your IRA subject to Required Minimum Distributions starting at age 73. You can't deduct the qualified charitable distribution, but its money won't be considered taxable income to you.

Charity raters Styron and Thatcher have three final tips for giving wisely in 2024.

Don't give reactively, says Styron.

"The number one reason people give to charity is because they're asked. That's the worst possible way to make your giving decisions," she says. "Because you might like the cause but conflate the cause with a specific charity asking for money."

If you receive a charitable solicitation by phone, Styron says, hang up.

"Most of the time, it's not someone from the charity who's pouring their heart and soul into the organization, it's a for-profit fundraising company taking 70% to 80% of your donation," she says.

Her other caution: Make your charitable contributions with a credit card, not by check or debit card.

"If you donate with a credit card and realize afterwards this is not a good charity or it might be a complete scam, the credit card companies have mechanisms to dispute charges and try to get your money back," Styron says. "If you use a debit card or check, good luck trying to get the money back."

Thatcher's advice: "Let your heart guide you into the process of giving to charity, but then do a little bit of analysis so you find an organization that's really making a difference. Follow your heart, use your head and then go do something."

Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More