Hurricane Harvey made landfall over the weekend. The category 4 hurricane crashed into the Texas coast, devastating families and businesses. At least two people have been reported dead, and estimates place the total cost of property damage and lost business in the billions.
If that isn’t bad enough, Harvey is now a Tropical Storm and is lingering off the coast, dumping water onto coastal Texas, including the Houston area. As the rain continues, many people are in danger due to flooding while others have lost homes and property. Houston is the fourth most populous metropolitan area in the country: over two million people call the city home, while the metropolitan area counts nearly 6.7 million as residents. By geography, the Houston metropolitan area covers 9,444 square miles, larger than the state of New Jersey.
I know that many of you, like me, want to know what you can do to help out. Some of the tax rules that apply to charitable donations – like checking to see that the organization has its paperwork in order – are good rules to follow even if you’re not claiming a tax deduction. So with that in mind, here are a few tips to keep in mind when helping out during Harvey:
- Cash is king. While you may want to send food and other items, the infrastructure may not support those donations. Many organizations have been clear that cash, or cash equivalent, is preferred (but keep reading). Keep receipts if you intend to claim those donations on your tax return.
- Stay put. Yes, we all want to get in our cars and help but don’t rush to help without checking first. There are already professionals and trained volunteers on the scene, and due to the potential for more flooding, relief officials have asked that folks stay off the roads where possible. If your services are needed and you do volunteer, remember that you can claim a tax deduction for your out-of-pocket expenses but not for your time.
- Be smart. Be wary of personal solicitations on your doorstep or over the phone. Make sure that gifts made by checks or credit card gifts are secure. And don’t send money by text or using apps like Venmo without first verifying the organization and the contact information. If you don’t want to donate online or by text, most organizations have alternatives, like donation forms that you can mail together with a check (never send cash through the mail). Always keep excellent records of donations since the Internal Revenue Service (IRS) requires that you do so for tax purposes – and having the information available is handy if you want to follow up with another donation.
- Do your homework. Check out the credentials of a potential donee/charitable organization before you donate. Charity Navigator is useful for gathering information about existing charities and has a Hurricane Harvey specific section. Forbes has its own list of the largest charities in the US complete with details on revenues, corporate pay, fundraising efficiency, and more (just click on the individual charity’s name for more info). Finally, you can always confirm charitable status through the IRS web site using the EO Select Check Tool. Remember that some organizations (like churches) may not be listed, so don’t be afraid to ask organizations which don’t appear on the list for more information.
- Check with the organization first. While most organizations prefer cash, there are some soliciting in-kind donations (see below). Those wish lists may change as needs are assessed and storage for items may be limited. Check with the organization before you send or drop off anything. And if you’re planning to claim a tax deduction for any in-kind goods, be sure to keep receipts showing what you paid for the items.
- Use caution when donating to individuals. For tax purposes, you can only deduct contributions to qualified tax-exempt charitable organizations. Donations to individuals are never deductible for tax purposes even if the individuals are really deserving. But there’s another, non-tax reason to use caution: money solicited for individuals could be part of a scam and even if it’s not, the money might not be spent as advertised. Keep in mind that once you hand over the cash, you have no control over how it might be used.
- Rely on oldies but goodies. There’s nothing wrong with new charitable organizations but there is something to be said for those that have been around for awhile – like the Red Cross. Brand new organizations may not have the facilities in place to offer the most effective relief – or they could be scams. Use caution before handing over your cash.
- Pay attention to the rules. The rules for charitable giving apply even in extraordinary situations although sometimes those rules may be tweaked to allow for more generosity. Stay informed. Be sure to document your gifts and get receipts. And never hesitate to ask the charitable organization or your tax professional if you have questions.