We all know that giving to charity is both personally satisfying, in that it allows us to give to the causes we support, as well as financially satisfying, when we fill out our taxes and collect on deductions.

And that’s great, but what is a charitable contribution?

According to the IRS, “a charitable contribution is a donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting to get, anything of equal value.”

The IRS states that “qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.” Qualified organizations have 501(c)3 status. Whether or not an individual organization is qualified can be found using the IRS Exempt Organizations Select Check tool.

Charitable contributions are not tax deductible for certain organizations. For instance, donations to sports clubs and chambers of commerce are not deductible. Neither are donations to political candidates or labor unions.

Though many people think of charitable contributions as simply consisting of cash, contributions are far from limited to money. Items such as clothing, jewelry and cars are tax deductible to varying degrees when donated. It is important to note that not all noncash contributions are accepted as tax deductible. For instance, service costs cannot be deducted, and blood donated to a blood bank or blood drive cannot be donated for monetary value.

Volunteer work is not deductible. However, costs directly resulting from volunteer work are deductible. For instance, the cost of gasoline used while travelling to and from volunteer work can be deducted.

There is a variety of paperwork which must be filled out in the process of claiming a deduction from a charitable donation. This paperwork depends on the size and nature of the donation. For example, to receive a deduction on any donation of $250 or more, cash or noncash, a receipt is required. Any noncash donation worth $500 or more means filling out IRS form 8383.

The most important thing about charitable contributions, however, won’t be found in tax codes or deductions. It will be found in the satisfying reward of giving time, money, possessions and effort to fight for a cause that you believe in. That’s something to which no monetary value can be assigned.

– Andrew Michaels

Sources: TurboTax Blog, IRS, IRS,
Photo: Business 2 Community

How to start a foundation
Starting a business is arguably one of the great American dreams conjured in the minds of many. Combining the freedom to be your own boss and the ability to pursue a passion to the fullest lures many to become entrepreneurs. The same can be said for those who want to start a foundation, social enterprise or a nonprofit organization. There are many parallels between a for-profit venture and a nonprofit one, such as possessing working knowledge of laws and creating an organizational structure. Perhaps the largest difference comes in the core mission; nonprofits work with their communities in mind rather than their pocketbooks.

So how do you start a foundation? explains that incorporating, similar to starting a for-profit business, is an initial and crucial step. Next comes filing for nonprofit status with the federal government, specifically the Internal Revenue Service (IRS). A piece from Entrepreneur makes it clear that while filing for this special tax-exempt, 501(c) 3  status is made easier with help from an attorney, individuals can complete the process themselves.  Hurwit & Associates, a Newton, Mass. law firm that specializes in nonprofit law, provides the filing requirements for each state. Additionally, there are professional services like that specialize in helping potential entrepreneurs start their firms and offer an easy three step process wherein they complete and send the nonprofit paperwork to you. The cost is highly agreeable versus hiring an attorney and starts at $99.

Obtaining 501(c) 3 status is contingent upon completing IRS Form 1023 and can be a difficult process. NOLO contends that the best time to file that form is “…within 27 months of the date you file your nonprofit articles of incorporation.  If you file within this time period, your nonprofit’s tax exemption takes effect on the date you filed your articles of incorporation…”  The 1023 Form itself is made up of 11 parts in which you disclose the full structure of your venture.

Entrepreneur, advises from Jeff Hurwit of Hurwit & Associates for the next step, “The foundation must be governed by a set of bylaws…provisions for the organization’s governance and board selection process, general decision-making, required meetings and conflict-of-interest policies. provides a good collection of bylaws information and samples.” The following steps involve being very selective and discerning in who to award foundation money to and building a strong board of directors. The board might ideally be composed of individuals who are considered experts in their field and therefore would lend credibility to decision making and the overall donation and award process. Last, the organization must practice good money management to remain viable and sustainable.  This includes strong fundraising efforts.

Chris Guillebeau, entrepreneur and New York Times bestselling author of The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future, contends that following one’s passion can be done today with very little money. Speaking to Forbes, Guillebeau explains his experiences meeting fellow entrepreneurs who began with little planning and startup cash, advising young people to take a chance and follow their passion. Specifically, he advises specifying ideas, acting now, networking heavily and committing to growth.

Going into business for oneself or starting a foundation are nearly synonymous at their inception. Both involve paperwork, commitment and proper management in all phases. With a plan, a little cash and unwavering passion for a cause, getting a venture off the ground is definitely something doable for anyone.

– Dave Smith

Sources: NOLO, Entrepreneur, LegalZoom, Forbes