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Make the most of your last-minute donations

Time's running out to contribute in 2005! “Today” financial editor Jean Chatzky explains the best way to handle your year-end donations.

Are you in the giving mood this holiday season? If so, your donations must be made by Dec. 31 in order to get a 2005 tax credit. “Today” financial editor Jean Chatzky shares advice on how to make the most of your charitable contributions.

With just about two weeks left until the end of 2005, charities worldwide know this is the best time to grab your ears — and your dollars. After all, unless you make your contributions before the crystal ball descends on Times Square, you can't write the gift off on this year's taxes.

And all indications are that people still very much want to give. According to the Giving USA Foundation, 2005 is shaping up to be an unprecedented year. Expectations are that giving by individuals will be up slightly, while corporate giving will be up significantly. As for donor fatigue — the much-written about fear that following the tsunami and hurricanes Katrina, Rita and Wilma donors would be tapped out — experts don't believe that's a factor. Year in and year out, Americans seem to give a consistent 2 percent of their income to charity. In the event of a disaster, most make a one-time effort to dig a little deeper.

Two percent may not sound like a lot, but it can be — particularly if you make an effort to see that it goes as far as possible. What do you need to do?

Piggyback on your disaster donations: Despite all the news coverage, hurricane-related charities didn't necessarily get all the money they needed to accomplish their goals. The Red Cross, for example, ended up borrowing a considerable amount of money, explains Bennett Weiner, Chief Operating Officer of the Better Business Bureau's Wise Giving Alliance. Moreover, as reconstruction heats up in the Gulf, other organizations — Habitat for Humanity, for instance — will need additional funds to keep their efforts going. In other words, if you're inclined to send a second check to the causes you supported when these disasters hit, that's not necessarily a bad idea. Just check their Web sites to make sure they are still in active need of the money. Those that have filled their coffers should say so, as Doctors Without Borders did following the tsunami.

But don't forget the social service charities at home. Although across the board charitable contributions are expected to be up, that doesn't mean local groups won't occasionally slip through the cracks. Particularly this time of year, Weiner suggests calling local food pantries, your local Salvation Army and other groups that are focusing on the needy in your area to see where the gaps are.

Combine giving and gifting (or giving and shopping): If your budget is a little squeezed (and, let's be frank, whose isn't?) there are a couple of ways to give a gift and give to charity simultaneously. The first is to give — as your gift — a contribution to the charity of your recipient's choice. A Web site called WhatGoesAround.com allows you to list the charities that mean the most to you (like a bridal registry) so that your friends can make meaningful contributions on your behalf. You can also give directly to most charities on the Web. The second way is to purchase something that has said a portion of sales will be donated to charity. Don't expect, Weiner notes, more than 10 percent of the purchase price to go to the underlying cause. “That's the norm,” he says. But do watch out for situations where you can't tell precisely how much money is going to the charity. You want to know how much of “sales” are going to the cause rather than “proceeds” or “profits.” Why? It's impossible to know, after all expenses are computed, how much “proceeds” or “profits” will actually be.

Watch rule changes on car donations: The IRS rules for tax-deductibility on donated cars changed this year. Previously, on cars worth more than $500 you were allowed to write off the fair market value of the car on your taxes. Now, if the charity is selling the car (and most do) you can only deduct the actual selling price. If, however, you can find a charity willing to use the car to, say, make deliveries, the fair market value — usually a higher number — can still be deducted.

Even more interesting, in response to Hurricane Katrina, charitable cash contributions made after August 28, 2005, get more favorable tax treatment. The contribution doesn't have to be Hurricane Katrina-related, although that was the intent. If you're so inclined, in 2005, you can contribute up to 100 percent of your income to charity instead of the 50 percent limit applicable most years. Now that's generous!

Keep your eyes open: I've said it before, but it bears repeating. Charity scammers come out of the woodwork this time of year, so keep your eyes open. Specifically, watch out for phishing ploys where you get an e-mail linking you to a (false) charitable Web site. If you want to make a charitable contribution on the Internet, surf to the site yourself. And never give your credit card number to a caller asking for a contribution. In past decades they wanted your cash; today, they likely want your identity. If you're going to make a charitable contribution over the phone, initiate the call yourself.

Finally, take the time to do at least a cursory amount of research. Yes, the clock is ticking and you want to get your contributions made before the end of the year. But don't let the pressure of that time push you into making a bad gift decision. Use the Web site Guidestar.org to make sure at least 70 percent of a group's donation is going to its underlying mission. Use Give.org to make sure a group has the Better Business Bureau's seal of approval. And, at the very least, go to the Web site IRS.gov and call up Publication 78. That's simply a list of all groups with charitable status. You don't want to give money to a charity that turns out not to be a charity after all.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today" show and is also a columnist for Life magazine. She is the author of four books, including 2004's "Pay it Down! From Debt to Wealth on $10 a Day" (Portfolio). To find out more, visit her Web site, .