Key takeaways 

• Charitable giving in the U.S. reached a high at over $592 billion in 2024

• More than 1.8 million charitable organizations exist in the U.S. with 501(c)(3) tax-exempt status

• Understanding an entity’s mission, purpose, and results can help donors maximize giving power

• Giving Tuesday donations rose to $4 billion in 2025 to kick off the giving season

Not all charities operate the same way, so a bit of research can help ensure donations truly make an impact. Understanding the differences between nonprofits and not-for-profits, reviewing mission alignment, evaluating transparency, and assessing measurable results all help donors make informed decisions. Confirming tax status and exploring strategic giving options can further maximize the effect of charitable contributions.

With more than 1.8 million charitable organizations in the U.S., choosing where to direct philanthropy can take some research.¹ Not all charities are created equal, so understanding how an organization will use the funds can help ensure donations have the most impact.

Giving on the rise 

Charitable giving increased in 2024, with philanthropic donations to U.S. charities reaching a record $592.5 billion, and that upward trend could continue.² Peak giving season kicked off strong, with donations on Giving Tuesday hitting an estimated $4 billion this year, up from $3.6 billion in 2024 — an encouraging indicator for how the rest of the season will go.³ And with sweeping tax changes as a result of the One Big Beautiful Bill Act, many more may be inspired to give: Beginning in 2026, some 144 million Americans who take standard deductions on their income taxes will be eligible to deduct charitable contributions (up to $1,000 for individuals filers and $2,000 for joint filers).

As giving grows, donors face a more complex landscape — and distinguishing between different types of charitable entities can be key.

Distinguishing between nonprofit and not-for-profit 

The terms “nonprofit” and “not-for-profit” are often used interchangeably, but there are some nuances. Understanding the difference is important for donors to help ensure they’re giving to the type of organization that best aligns with their intentions.

Nonprofit organizations operate with a legally recognized mission or social purpose, rather than a goal of generating profit. They’re typically overseen by a board of directors, and any revenue they earn is reinvested into their programs and not distributed to shareholders. Many hospitals, universities, national charities, and foundations fall under this category — tax-exempt under section 501(c)(3) of the Internal Revenue Code.^4,5

Not-for-profit organizations (NFPOs) differ in purpose and scope from nonprofits. NFPOs typically focus on benefiting a specific group rather than the general public — for example, recreational clubs, parent-teacher associations, and social organizations. They can still accept donations, but their purpose is typically narrower. Like nonprofits, they generate revenue through external sources like donations and grants (NFPOs might have membership dues) and reinvest any profit back into the organization. However, while they may qualify for some tax benefits, typically they don’t qualify for a full tax exemption like a nonprofit.⁶

Read more: Charitable giving: Tax-smart strategies for doing good

Aligning goals and mission 

For many donors it may be important to find a charitable organization whose goals and mission support what matters most to them. Reviewing a charity’s mission statement can shed light on the specific purpose the entity serves and the issues it tackles, along with its geographic focus, long-term goals, and other insights. A clear, well-defined mission can be a good sign of a focused and effective organization.

Read more: “Giving while living” can help build generational wealth

Identifying how the charity allocates resources 

Charitable organizations need administrative support and fundraising and often have other overhead expenses to operate efficiently. But it’s important to understand if the group will manage donations and programs effectively. As part of due diligence, look at whether the charity:

• Clearly breaks down spending across programs — what portion of resources is allocated to administration and fundraising versus funding the activities and causes at the heart of the organization’s mission?
• Provides access to IRS Form 990⁷
• Is transparent about how it allocates resources and why

If an organization avoids sharing financial details or seems vague about how donations are used, that could be a potential red flag.

Evaluating the charity’s impact 

While many organizations can clearly articulate goals, not all can demonstrate how their work leads to measurable results. For donors, evaluating impact means looking beyond mission statements and asking how the organization proves its value.

An effective charity will likely track outcomes and measure results. Look for annual reports outlining progress toward goals, and data points showing what has changed and how donations have translated into tangible improvements. Independent assessments can also provide useful clarity. Platforms such as Charity Navigator, GuideStar, and the BBB Wise Giving Alliance can be useful resources to help evaluate entities based on transparency, financial health, and evidence of results.^8,9,10

Making donations count 

Choosing a charity is an important step, but developing a holistic giving-back strategy can be an important part of a comprehensive financial plan. Bunching strategies, donor-advised funds, and gifting assets other than cash such as publicly traded securities are just a few options to consider for optimizing giving power. Additionally, before donating, it’s essential to verify a charity’s 501(c)(3) status if tax deductions are a priority.

Read more: 144 million Americans may soon get a new tax break for charitable donations