Giving Money Directly to People: How Many Charities Do, and the Rules

Yes, a nonprofit can give money to an individual, and a sixth of charities do. The condition is that the person is helped as a member of a group the organization exists to serve, chosen by criteria it can show, and not because a donor or a director picked them. Everything else on this page follows from that one rule.

Across 256,539 charities filing a full Form 990, 41,139 (16.0%) report grants or other assistance to individuals in the United States, and 34,564 of them give more than $5,000 in the year. The figures below are from the IRS annual extract of those returns, and the analysis script is published with the method.

The rule: a charitable class, not a chosen person

A 501(c)(3) organization must serve a public purpose. Helping a person is a public purpose when that person belongs to a charitable class: a group large or open-ended enough that the community benefits, such as students from a county, families who lost a home in a fire, or patients who cannot afford a treatment. The IRS sets out the approach most fully for disaster and hardship relief in Publication 3833, and the same logic governs scholarships, emergency funds and direct cash programmes.

Three things make the difference in practice. The criteria are written before anyone is chosen. The selection is made by people with no personal interest in the outcome. And the need or merit is assessed and recorded, so that the file shows why this person qualified. An organization that can produce those three for every payment is on solid ground; one that cannot is making private gifts with charitable money.

Private foundations have an additional layer. Grants to individuals for travel, study or similar purposes need the foundation’s procedures approved by the IRS in advance, under the taxable expenditure rules. Public charities do not need that approval, which is one of the practical differences covered in charity, foundation and nonprofit compared.

How many charities actually do it, by size

Amounts are among organizations that give anything. The share rises with size, from 13.8% of charities under $250,000 to 33.6% of those over $25m, largely because large organizations run many programmes and one of them usually involves paying for something on a person’s behalf. The typical small giver is modest: a median of $19,500 a year under $250,000, and a quarter give $4,700 or less.

For comparison, 20.9% of charities make grants to other organizations, and 4.8% make grants of any kind outside the United States. Giving to individuals is less common than giving to organizations, but not by much.

What the line covers is wider than the word “grant” suggests. Part IX line 2 of Form 990 holds scholarships, emergency cash, rent and utility payments, food and medical assistance paid for a person, and the value of goods given to them. An organization that pays a family’s electricity bill directly is giving assistance to an individual as much as one that writes a cheque.

For some charities it is the whole mission

Among organizations that give anything, the median puts 7.3% of spending into it. But 6,555 organizations (15.9% of givers) put half or more of everything they spend into direct assistance, and they are concentrated at the small end: 30.1% of givers under $250,000 are in that position. These are memorial scholarship funds, local emergency funds, and medical and funeral assistance charities, where the payment is the programme.

Those direct assistance charities look different on the balance sheet. They hold a median of 7.5 months of cash against 4.9 for organizations with no assistance to individuals at all, and 93.4% of their revenue is gifts and grants, including government grants, against 66.2%. That makes sense for an organization with nothing to sell and a promise to pay out when need arrives, and it matches the reserve pattern on how much cash charities hold.

Where the $93.7 billion goes

Across the sector, assistance to individuals in the United States comes to $93,710,208,442, or 3.11% of all spending by these filers. The top 1% of givers account for 62.8% of it, and the top 10% for 93.3%.

The largest are recognisable types rather than anything unusual. Universities such as Harvard and Stanford report student aid in the hundreds of millions, though it is a small share of their spending. Patient assistance charities such as HealthWell Foundation, California’s regional centres for people with developmental disabilities, and international relief organizations such as Americares report most of their spending on the line, because paying for care, services or medicine on a person’s behalf is what they do.

For a small organization the aggregate is irrelevant; the size table is the benchmark. It is included here because figures quoted for “charitable assistance” often come from the aggregate and describe a handful of very large programmes.

What donors can and cannot direct

A donor can give to a fund that helps a class of people. A donor cannot, in substance, give to a named person through the charity and deduct it. The IRS position is that a contribution earmarked for a specific individual is a gift to that individual, and it is not deductible however it is routed.

That shapes how appeals should be written. “Help the Garcia family rebuild” invites earmarked gifts. “Our fire relief fund helps families who lose their homes, including the Garcias” describes a class, as long as the organization genuinely controls who receives the money and could direct it elsewhere. If every dollar raised goes to one family whatever happens, the wording does not rescue it. Crowdfunding platforms that pay a named person directly are a different arrangement, and gifts there are generally not tax deductible.

Donors can legitimately set the criteria for a fund they establish, such as a scholarship for nursing students from one high school. What they should not do is choose the recipients, or sit on the committee that does. The same applies to scholarships named after a donor’s family.

Named funds like these are major gift relationships, and the risk sits in what the donor was told. A fund agreement signed in year one gets administered by someone else in year six, and the conversation in which the donor accepted that they could not pick the winners is rarely written down anywhere a successor will find it. Record it in the gift agreement and in the donor file. For a development team managing many such relationships, Gratefully builds that context from the CRM, documents and email, and produces handover notes when a relationship changes hands, at $4,800 a year for five seats. It is the wrong purchase for a single memorial scholarship with a handful of donors, where a signed agreement and a well kept folder do the whole job, and like any such tool it can only preserve what somebody recorded.

Giving to insiders or their families

Form 990 asks directly whether the organization gave a grant or other assistance to a current or former officer, director, trustee or key employee, a founder, a substantial contributor, or a family member of any of them (Part IV line 27). The answers are more common than the rule might suggest, and they rise with size.

Across the sector 1,131 organizations (0.44%) answer Yes, and 2.09% of those giving to individuals do. At large organizations the usual reason is benign: an employee’s child wins a scholarship open to the public, or a staff member hit by a disaster qualifies for a relief fund on the same terms as everyone else. It is allowed, and it has to be reported on Schedule L.

What makes it defensible is the process, and it is the same process as above with one addition: the person connected to the recipient takes no part in the decision. Record the declaration and the recusal in the minutes, which is what a conflict of interest policy is for. Assistance that gives an insider more than the programme would give anyone else is an excess benefit, which carries penalty taxes on the person and on any manager who approved it knowingly.

Employer-sponsored hardship funds are a special case. Publication 3833 allows a charity connected to an employer to help that employer’s employees, on conditions that include recipients being chosen by a committee the employer does not control. A fund that simply pays whoever the managers pick is not charitable.

Whether the person owes tax on it

Usually not, but it depends on what the payment is for.

Assistance given because of need, such as emergency cash, rent help or medical costs, is generally treated as a gift or a general welfare payment and is not taxable income to the person. A qualified scholarship for a degree candidate is excluded from income when it pays tuition, required fees, books and required supplies; the part that pays for room and board is taxable to the student.

A payment that is really for work is neither. If the “grant” is conditional on the person doing something for the organization, it is compensation or a contractor payment, with the reporting that follows, set out in when a nonprofit issues a 1099. Labelling a fee as a grant is one of the more common ways small organizations get this wrong, and it is worth an accountant’s view if the line is blurred.

What to have in place before the first payment

None of this needs to be elaborate for a small fund. Two pages of policy and a spreadsheet of decisions is enough, and it belongs with the rest of your core policies. The test is whether someone reading the file a year later could see why each person was helped.

Reporting it on Form 990

Part IX line 2 carries the total. If it is more than $5,000, Part IV line 22 is answered Yes and Schedule I Part III is required. That part does not name recipients: it lists the type of assistance, the number of recipients, the cash and non-cash amounts, and how non-cash help was valued.

The two answers are not always consistent. 1,272 organizations answered Yes with $5,000 or less on line 2, and 2,158 reported more than $5,000 and answered No, against 34,564 organizations over the threshold. That is a small error rate, but the second group is missing a schedule, and it is an easy check before filing. The full walk through the return is in the Form 990 guide.

Method and limits

The data is the IRS SOI annual extract for processing year 2024, restricted to 501(c)(3) organizations with at least $25,000 of total expenses, which gives 256,539 returns. Assistance is Part IX line 2, column A; organizational grants are line 1 and foreign grants line 3; the flags are Part IV lines 22 and 27. Months of cash is cash plus savings over monthly expenses.

Four limits. Organizations filing Form 990-EZ or 990-N are absent, and many small scholarship funds are in that group. The extract carries no names, so the organizations named above were identified from their public returns. Line 2 mixes cash and the value of goods, so it measures assistance rather than money handed over. And nothing here is legal or tax advice; for anything beyond a straightforward needs-based programme, take advice before paying out.

Questions people ask

Can a nonprofit give money to an individual?

Yes, if the person is helped as a member of a charitable class the organization exists to serve, chosen by written criteria, with the need or merit assessed and recorded, and selected by people with no personal interest. 16.0% of charities filing a full Form 990 report assistance to individuals in the United States. What a nonprofit cannot do is make a private gift to someone chosen by a donor or a director.

Can a nonprofit give a gift to an individual?

Not a personal gift. Charitable assets can only be used for charitable purposes, so any payment has to be assistance under a programme with objective criteria. A small token of thanks to a volunteer is a different matter, and is usually treated as an ordinary programme or recognition expense, but cash gifts to chosen individuals outside a programme are private benefit.

Can I donate to a nonprofit for a specific person?

You can give to a fund that helps people in that person's situation, and the charity may decide to help them. You cannot deduct a gift that is earmarked for a named individual, because the IRS treats it as a gift to that person routed through the charity. If you want to help one person directly, give to them directly, without a deduction. Donors can set the criteria for a named fund they establish, and the charity should record in the gift agreement that the donor does not choose recipients.

How much do nonprofits typically give to individuals?

Among charities that give anything, the median is $19,500 a year under $250,000 of spending, $30,000 at $250,000 to $1m, and $100,123 at $1m to $5m. The typical giver puts 7.3% of its spending into assistance, but 15.9% of givers put half or more of everything they spend into it.

Can a nonprofit give assistance to a board member or employee?

Yes, on the same terms as anyone else in the eligible group, with the connected person taking no part in the decision, and with the assistance reported on Schedule L. 0.44% of all charities report doing so, rising to 7.84% of large organizations that give to individuals. Assistance on better terms than the programme offers others is an excess benefit and carries penalty taxes.

Is financial assistance from a nonprofit taxable?

Need-based assistance such as emergency cash or rent help is generally not taxable income. A qualified scholarship for a degree candidate is excluded when it covers tuition, required fees, books and supplies, while amounts for room and board are taxable. A payment made in exchange for work is compensation, whatever it is called.

Does a nonprofit have to report grants to individuals?

Yes. The total goes on Form 990 Part IX line 2. Over $5,000, Part IV line 22 is answered Yes and Schedule I Part III lists the type of assistance, number of recipients and amounts, without names. 2,158 organizations reported more than $5,000 but answered No, so the check is worth making before filing.

Where do these figures come from?

The IRS Statistics of Income annual extract of Form 990 returns, processing year 2024, covering 256,539 charities with at least $25,000 of spending. It is a free public download, and the analysis script is published alongside the method.

This is reference information, not legal or tax advice. Rules vary by state and change over time. For a decision that carries real consequences, check the current text at irs.gov or your state registry, and talk to a nonprofit attorney or CPA.