Giving charitably this holiday season? Here’s how to research nonprofits before you donate your dough.

On Giving Tuesday this year, more Americans chose to kick off the holiday season by donating funds to charity than they did last year.

An estimated 35 million people participated, donating $2.7 billion in the U.S. on the Tuesday after Thanksgiving, according to the GivingTuesday Data Commons.

That’s a 6% increase in contributors and a 9% increase in donations compared to 2020.

As giving continues through the season, there’s no shortage of organizations in need of assistance. But how can you tell if a charity is legitimate? Or that your funds will be used appropriately? And once you donate, what documentation do you need for tax purposes?

Gina Miller, United Way of Central Indiana’s chief operating officer and chief financial officer, has some tips to help you navigate charitable giving responsibly.

“Giving is a way to help the things that are closest to home, the things that are near and dear to your heart, and it really does make a difference,” Miller said. “And it feels good, too.”

How do you vet a nonprofit you’re interested in giving to?

Start with a watchdog agency.

Miller recommends researching on GuideStar or Charity Navigator to get a pulse on the nonprofit and its work. There, you can find not only the organization’s 990 tax forms, but information about its mission, leadership and finances.

Charity Navigator evaluates nonprofits and assigns ratings based on accountability, transparency and financial strength.

“There’s so much information at our fingertips that wasn’t there 20 years ago,” Miller said.

You can also use the Internal Revenue Service’s search tool to confirm an organization’s eligibility – including whether its tax-exempt status has been revoked.

Miller also suggests reviewing the nonprofit’s own website: Look for stories that provide examples of the organization’s work. Make sure the nonprofit’s mission aligns with your own passions.

When it comes to making your donation, are there best practices for how to give?

How donations are collected – cash, check, credit card – will vary by organization.

Miller said United Way of Central Indiana tries to have every possible platform available to meet people where they are: “We know the world changes rapidly, and we want to make it as easy as possible.”

Miller recommends using a trackable method so that you have a record of your giving.

Keep in mind: When you donate with a credit card, those nonprofits have to pay a fee, Miller said. Some platforms will ask if you want to contribute an additional small percentage to cover the transaction fee.

What are the tax benefits of charitable giving?

Charitable contributions are deductible if you’re itemizing your tax returns.

Miller said there are other ways people give that are beneficial to both the donor and the nonprofit.

Some people donate appreciated stock – a benefit because they don’t pay taxes on the gain, she said. Others do planned giving by including organizations in their wills or naming them as beneficiaries in life insurance policies.

When you donate, what documentation should you keep?

Any and all giving counts toward your tax deductions – including that $10 bill you dropped in the Salvation Army red kettle last week.

Miller recommends jotting everything down in one place: “I encourage folks to keep a running list throughout the year.”

As a donor, you must have receipts for any donations of $250 or more. If you get to the end of the year and don’t have a receipt you need, reach out to the organization and ask for one.

Don't forget about your donated goods, too. Miller said most tax software has a way of accounting for that, including those clothes you donated to Goodwill this year.

“Sometimes it’s worth a lot more than you realize,” Miller said.