Guide to Donating to a Nonprofit

Superheroes are known for selflessly dedicating their lives in service to others. Unfortunately, in our reality we don't have a Superman to save us from missiles and meteors, but we do have something much more grounded in our individual and present needs – nonprofit organizations.

Nonprofit organizations operate for a collective public or social benefit as opposed to businesses which operate for profit. This means that any revenues which exceed their expenses, must be committed back into the organization's mission. Nonprofit organizations are also known as a non-business entity or nonprofit institution or simply, nonprofit.

Nonprofit organizations typically obtain the majority of their revenues from generous donors who selflessly give charitable contributions to support the organization's mission. With social and financial benefits for the receiving organization, donors, and, most importantly, those in need, charitable donations become a superpower in their own way, paving the way for genuine and life-saving work to be done.

Bold.org is a registered 501(c)(3) nonprofit dedicated to reducing student debt. Apply to be a donor now and help students get the college education they deserve!

Understanding Nonprofit Organizations

There are 1.5 million registered nonprofit organizations in the United States. However, they do not serve the same purpose, have different structures and methodologies, and are legally differentiated. Let's take a look at all these different variations!

Mission & Goals of a Nonprofit Organization

In the vast landscape of nonprofit organizations, diverse missions, and goals drive their efforts to make positive impacts on society. From providing essential aid to vulnerable communities to advocating for environmental conservation and social justice, nonprofits play a crucial role in addressing a wide range of issues. Here are some examples of the most common and popular categories for nonprofits.

Humanitarian

• Mission: Providing humanitarian aid and support to disadvantaged individuals or communities.
• Goal: Alleviating poverty and improving access to basic needs such as food, shelter, and healthcare.
• Example: Red Cross, Salvation Army, Feeding America.

Environmental

• Mission: Protecting and preserving natural habitats, wildlife, and the environment.
• Goal: Promoting sustainable practices and raising awareness about environmental issues.
• Example: World Wildlife Fund (WWF), Sierra Club, Greenpeace.

Education

• Mission: Promoting education and knowledge sharing for personal and societal development.
• Goal: Enhancing access to education, supporting learning initiatives, and fostering literacy.
• Example: Teach For America, Khan Academy, and UNICEF (education programs).

Healthcare

• Mission: Improving healthcare services, advancing medical research, and promoting public health.
• Goal: Preventing diseases, finding cures, and improving healthcare access and quality.
• Example: American Cancer Society, Doctors Without Borders, Susan G. Komen for the Cure.

Arts & Culture

• Mission: Fostering artistic expression, preserving cultural heritage, and promoting creativity.
• Goal: Supporting artists, promoting cultural diversity, and providing access to arts education.
• Example: Museum of Modern Art (MoMA), National Endowment for the Arts (NEA), UNESCO.

Social Justice & Advocacy

• Mission: Advocating for human rights, equality, and social justice.
• Goal: Addressing systemic injustices, promoting civil liberties, and supporting marginalized communities.
• Example: ACLU (American Civil Liberties Union), Amnesty International, and NAACP (National Association for the Advancement of Colored People).

Animal Welfare

• Mission: Protecting and advocating for the rights and well-being of animals.
• Goal: Preventing animal cruelty, promoting responsible pet ownership, and conserving wildlife.
• Example: ASPCA (American Society for the Prevention of Cruelty to Animals), Humane Society International, and Wildlife Conservation Society.

These are just a few of the hundreds of thousands of causes that nonprofits dedicate themselves to. Many nonprofits also fall under multiple categories, such as the World Wildlife Fund, which has both environmental conservation and animal welfare elements in its mission.

What all these have in common is their dedication towards serving their community, whether it is on the global scale that organizations like UNICEF strive towards or a local initiative like Boston-based Spoonfuls, which concentrates its efforts on the Massachusetts communities in need. A nonprofit organization's goal, regardless of the method, is, ultimately, to make the world a better place. So you can guarantee that no matter which nonprofit you donate to, someone in need is living a better life because of it.

IRS Classification of Nonprofit Organizations

Related to their missions and goals, nonprofits can also be classified according to their tax deduction or exemption status under the Internal Revenue Service (IRS), an agency under the US Department of Treasury that handles anything tax-related. There are 29 different types under section 501(c), but most nonprofits are classified as 501(c)(3).

501(c)(3)

The IRS definition of a 501(c)(3) organization is: "Organizations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes." These organizations are exempt from federal income tax and are eligible to receive tax-deductible charitable contributions, which significantly aid their fundraising efforts. They are further split into two types: public charities and private foundations.

• Public charities: Public charities are the most prevalent type of nonprofit organization. They receive broad public support and engage in a variety of activities, including providing direct services (e.g., food banks and homeless shelters), conducting public education (e.g., universities and museums), and promoting the arts (e.g., theaters and orchestras). These organizations receive public donations, which are tax-deductible. This helps them attract funding from a wide donor base. Public charities are essential in addressing immediate community needs, supporting education, and enhancing cultural life.
• Private foundations: Private foundations typically receive funding from a single source, such as an individual, family, or corporation, and use their resources to support charitable activities through grants. They do not usually engage in direct service activities. Examples include the Bill & Melinda Gates Foundation and the Ford Foundation, which fund a wide range of initiatives in education, health, and global development. These foundations play a critical role in driving large-scale social impact through strategic philanthropy.

While these charitable organizations are what most people think of when they hear "nonprofit", it's important to acknowledge that the IRS classifies many different organizations as nonprofits.

For example, political nonprofits exist! They are political organizations engaging in activities related to influencing government policy, advocating for specific issues, and supporting or opposing political candidates and legislation. They are classified under section 527 by the IRS.

Some religious organizations are also classified as nonprofit entities, as are some corporate giving programs. If you're ever in doubt about an organization's nonprofit status, check the IRS website to see if they receive a tax-exempt status. Remember, just because they aren't a 501(c)(3) organization doesn't mean they aren't a nonprofit.

Bold.org is registered with the IRS as a 501(c)(3) private foundation organization. Find out how your 100% tax-deductible contributions can aid in reducing student debt!

Researching Nonprofit Organizations

A crucial component of donating to a nonprofit is first selecting the right nonprofit. Much like college students choosing a university to attend, there are many factors that go into choosing the right fit. Factors that go beyond prestige, influence, and popularity. Here, we've compiled a step-by-step

1. Identify Values and Interests

Take the time to reflect on what matters most to you. While certain issues have always been on your radar, it's important to evaluate if you genuinely have an interest in them. Consider issues like education, environmental conservation, social justice, health care, animal welfare, or any other cause that resonates with your values.

Once you've compiled a list of the charitable causes you're most drawn to, rank these causes based on their significance to you. Also, consider the impact you wish to make through your donation.

2. Research Nonprofits

It can seem daunting to isolate a perfect fit admist the thousands of other nonprofits which may support your chosen cause. Luckily, there are charity evaluation platforms which do the work for you. These include: Charity Navigator, GuideStar, and Great Nonprofits.

After narrowing down your options, visit the websites of each potential nonprofit to understand their mission, goals, and focus areas. Ensure their mission statement not only resonate with your vision, but also their methodology.

Now, assess their programs and impact. Make sure to review the programs and initiatives offered by each nonprofit. Look for information on how they measure their impact, their success stories, and their approach to achieving their mission. Don't base your entire decision on anecdotes. Look for evidence of widespread impact.

3. Assess Their Utilization of Donations

One final thing to consider in your search for the perfect nonprofit to donate to is financial transparency. Look for nonprofits that provide transparent financial information, including their annual reports, IRS Form 990 filings (available on GuideStar), and breakdown of expenses. Evaluate their financial health, efficiency in using funds for programs, and accountability.

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Types of Donations to a Nonprofit Organization

Now that you've chosen the perfect nonprofit organization to donate to, the next step is identifying how you can contribute to their cause. Here are five of the most common ways to support the organization's mission.

Monetary Donations

Monetary donations include any donations involving solely money. This can come in the form of dropping off money in-person to the organization or donating online with a credit/debit card. Furthermore, there are two methods for a donor to donate money.

• One-Time Donation: occurs when a donor gives a specific monetary amount to a nonprofit once. These operate completely at the donor's behest and don't involve a reccuring schedule or written expectation of when and how the donation will be made. This is typically the most popular type of donation as it is straightforward and provides immediate funds for the nonprofit.
• Recurring Gifts: occurs when a donor commits to a consistent schedule of when and how to donate. The benefit is that it enables nonprofits to predict their cash flow, which allows them to allocate their funds more accurately. Furthermore, this may be an optimal set-up for donors who can't make big one-time donations but are able to contribute a little every month/year. Compare a $1200 one-time donation to $100 every month.

In-Kind Donations

In-kind donations include all non-monetary donations to a nonprofit. It usually involves goods and services. These may be preferred over monetary donations as they bypass the extra effort required to allocate funds and procure goods and services. Nonprofits may commonly submit requests to companies catered towards their areas of need.

• Goods: Physical items such as clothing, food, medical supplies, books, or equipment. These donations help meet immediate needs or support the nonprofit's programs.
• Services: Professional services like legal advice, marketing, accounting, or IT support provided at no cost. These donations save the nonprofit money and provide expertise that might otherwise be unaffordable.
• Facilities: Provision of meeting, storage, or event space. This can include office space, venues for fundraising events, or temporary housing for beneficiaries.

Planned Giving

These are donations made through the donor's estate or financial plans. This allows nonprofits to plan accurately for a future influx of money but the downside is that organizations typically don't receive planned giving donations immediately.

• Bequests: Gifts left to a nonprofit in an individual's will or estate plan. This type of donation allows donors to leave a legacy and support the nonprofit beyond their lifetime.
• Charitable Trusts: Trusts set up to provide income to the nonprofit either immediately or after the donor's death. These can offer tax benefits to the donor and long-term financial support to the nonprofit.
• Life Insurance Policies: Naming a nonprofit organization as a beneficiary of a life insurance policy. This can be a way for donors to make a substantial future donation.
• Retirement Plans: Designating a nonprofit organizations as a beneficiary of retirement accounts, such as IRAs or 401(k) plans. This allows donors to make impactful gifts with tax advantages.

Event-Based Donations

• Fundraising Events: Donations collected through online or in-person events such as galas, auctions, walks/runs, or benefit concerts. These events also raise awareness, engage the community, and offer gratitude to major donors. A fundraising event is especially great for soliciting donations from individual donors.
• Crowdfunding: Contributions made through online campaigns that raise small amounts of money from a large number of people. This method leverages social networks to reach a broad audience and more donors.
• Pledge Drives: Campaigns where donors commit to giving a certain amount, often over a specified period. These drives can be linked to specific goals or events. This is a great way to ensure you remain committed to a cause.

Stock and Securities Donations

• Stock Donations: Contributions of appreciated securities, such as stocks, bonds, or mutual funds. Donors may receive tax benefits by avoiding capital gains taxes, and this may be a more convenient form of financial contributions.
• Real Estate: Property given to a nonprofit, which can be used by the organization or sold to raise funds. Donating real estate can provide significant support to a nonprofit’s capital needs.

This blog about fundraising ideas for nonprofits answers all your questions about other ways nonprofit organizations may fundraise!

Tax Considerations for Donors to Charitable Organizations

When deciding to donate to a nonprofit, it's important to understand the various tax implications that can affect your financial planning and maximize the impact of your contribution. From ensuring your donation is tax-deductible to understanding limits on charitable deductions, being informed about these tax considerations can help you make the most of your generosity.

Tax-Deductible Donations

• Eligibility: Ensure the nonprofit is a registered 501(c)(3) organization, meaning they hold a tax exempt status. Only donations to qualified charities are tax-deductible under the IRS.
• Documentation: Obtain a receipt or acknowledgment from the nonprofit for your donation, especially if it’s over $250. This documentation is necessary for claiming a deduction on your tax return. This is especially important for financial donations.
• Quid Pro Quo Contributions: If you receive goods or services in exchange for your donation (e.g., a dinner or event ticket), the nonprofit must provide a written statement indicating the fair market value of the benefits received and the portion of your donation that is tax-deductible.

Limits on Charitable Deductions

• Contribution Limits: Be aware of the IRS limits on charitable deductions. Generally, you can deduct up to 60% of your adjusted gross income (AGI) for cash donations to public charities, though this limit can vary. Some public charities allow you to deduct up to 100% of your AGI.
• Carryover Provisions: If your donations exceed the annual limits, you can carry forward the excess contributions for up to five subsequent tax years.

Types of Donations

• Cash Donations: These are straightforward and fully deductible up to the AGI limit.
• Non-Cash Donations: Donating appreciated securities, real estate, or other non-cash assets can offer tax benefits, such as avoiding capital gains taxes and receiving a deduction for the fair market value of the donated assets.
• In-Kind Donations: For donations of goods or services, the nonprofit should provide a detailed receipt. You can deduct the fair market value of the donated items, but services donated don't receive tax deductions.

Year-End Giving

• Timing: Donations made by December 31st are deductible for that tax year. Plan your year-end giving to maximize your tax benefits.
• Bundling Donations: Consider "bundling" multiple years of donations into a single year to exceed the standard deduction threshold, allowing you to itemize and gain a larger tax benefit.

Remember the IRS has created these tax deductions in order to support promote nonprofits. So make sure you donate for the sake of the organization's goals and not for the sake of getting a tax deduction.

Here at Bold.org, we're dedicated to supporting our donors and ensuring they have all the information they need to commit to our cause. On our FAQ page, you'll find additional information to satisfy any doubts before donating.

Tips for Effective Donations to Nonprofit Organizations

Now that you understand what a nonprofit is, researched a perfect fit, determined how you want to contribute to their cause, and considered the tax-exempt status of your donation, here are some tips to further maximize your donation!

Tip 1: Know Your Charity

Nonprofit organizations are required to provide details information about themselves to a donor. You should never be donating to an organization you know nothing about. Don't hesitate to ask for information about their board of directors, annual financial reports, and an elaboration upon their mission statement. Genuine nonprofit organizations love to respond to potential new donors.

Tip 2: Find Out Where Your Donation Goes

Ask a representative from the fundraising team for specific information about how much money is spent on administrative services and how much is spent on the actual charitable programs. Fundraising programs for big nonprofits, which include divisions of donor management, may take up more funds than you would have thought. Look into how many individuals were served annually or any major program milestones achieved.

The most highly efficient nonprofits can spend 75% or more on their programs. These are usually well-established, well-funded groups, so if your chosen nonprofit is smaller and services a less popular cause, prepare to give them a little leeway.

If your nonprofit organization operates locally, contact local organizations to verify the impact of your own nonprofit donations. You have a right to know that your generous donations are going towards the causes your nonprofit claims they are.

Tip 3: Don't Respond to Pressure

Legitimate nonprofits will respect your need to think it over and won't rush you into giving. High-pressure tactics can be a red flag for scams or inefficient organizations. Honest nonprofits will respect your time and understand that each donor makes a different amount of money and consequently has a different ability to give. Remember, you can always politely decline requests to donate.

Tip 4: Keep Records of Your Donations

Always obtain and save receipts or acknowledgment letters for your donations, as these documents are essential for tax purposes. Proper record-keeping ensures you can claim deductions accurately on your tax return. Additionally, maintaining a record helps you track your charitable giving over time.

Tip 5: Tax Exempt Doesn't Always Mean Tax-Deductible

Not all tax-exempt organizations qualify for tax-deductible donations, so verify the nonprofit's status with the IRS. An organization with a tax-exempt status means that the organization itself doesn't have to pay taxes -- it has no bearing on the donor's individual donations. Tax-deductible means that the donor can deduct contributions to the nonprofit on their tax return. Make sure your nonprofit is a registered 501(c)(3) to benefit from tax deductions.

Tip 6: Beware of Accepting Gifts From Your Nonprofit

Some nonprofits offer gifts or tokens in return for donations, which can reduce the tax-deductible amount of your contribution. This is a fundraising tool operating much like point systems in commercial rewards programs. Be aware that accepting these gifts can affect your tax benefits. Prioritize the cause over the perks to maximize the impact of your donation.

Tip 7: Give Generously

While the previous tips seem to be warning after warning about nonprofits that may scam you, don't lose sight of your initial motivation. Consider your financial situation and ability to give, and try to support your chosen causes as generously as possible.

The more donations an organization receives, the more they are able to effectively achieve their cause. Thoughtful, generous donations can significantly advance a nonprofit's mission and help them achieve their goals. Even small contributions, when given consistently, can collectively make a big difference.

If you're interested in donating to Bold.org, hop onto our scholarship page to see the thousands of scholarships we offer for students with your donations.

Frequently Asked Questions About Donating to a Nonprofit

What is the best nonprofit to donate to?

The best nonprofit to donate to is one that aligns with your personal values and has a proven track record of effectively using donations to achieve its mission. Research organizations using resources like Charity Navigator or GuideStar to find reputable nonprofits in your areas of interest.

With that being said, some popular nonprofits which solicit hundreds of thousands of dollars in donations every year include: Feeding America, Salvation Army, Habitat for Humanity and the beloved Goodwill.

What is the most common donation amount?

The most common donation amount varies widely depending on the donor's financial situation and the nonprofit's fundraising strategy. Many donors give small, recurring amounts, such as $25 or $50 monthly, which can add up significantly over time and provide reliable support for nonprofits. Be sure to check donation rules for a nonprofit if you're contributing in a more unorthodox way.

Why do nonprofits want to solicit donations?

Soliciting gifts is crucial for nonprofits to fund their programs, services, and operations, enabling them to fulfill their missions and make a positive impact. Donations provide essential resources that allow nonprofits to address community needs, support beneficiaries, and achieve long-term sustainability.

Have more questions about donating? Check out our blogs about donors, curated specifically towards answering questions about fundraising, donations, and funding.