Donations and Charities
So many people feel the urge to give back to their local community or to others in need. Amidst all of the consumerism and focus of buying gifts for our friends and loved ones, it’s great to be able to spread the love and pay it forward in some way.
This can be a tough time of year for many people and giving is in and of itself a very good thing. But some people may not be aware that they can actually receive a little bit of a tax break for their charitable donations.
Here is a list of tips for paying it forward:
1. Give to qualified organizations. In order to be able to deduct your donation you have to be sure it’s on the list of qualified organizations. How do you know if it’s a qualified organization or not? You can go to the IRS website and they have a thorough list of organizations that would meet the requirements. Of course it is fine to give to other organizations but be aware that you will not be able to deduct this donation on your taxes.
2. Keep records of your giving. Always ask for a receipt or some sort of written record of your donation, even if it’s a cash donation. It should include the name of the donation, the date, the amount of your donation, whether it’s cash, check or an item. Keep in mind if you’ve donated an item or a group of items more than $5,000, you are going to need to have that item formally appraised so that you have an official record of its value. You do not need to turn in records with your tax return; however you will need to keep the records on hand in case you are audited by the IRS.
3. Know your limits. There may be limits to how much you can deduct based on the percentage of your adjusted gross income or AGI. It’s good to have an idea of these amounts beforehand. For example, typically you can deduct non cash items worth up to 30% and you can deduct cash items up to 50% of your AGI.
4. Incentives decrease deduction amount. If you receive a gift in return for your donation, when you file taxes you will have to subtract the value of that gift from the amount that you donated.
5. You can’t deduct the value of volunteer time. If you decide to volunteer your time at an event, you cannot deduct the value of the time you spent there. However, you may be able to deduct your travel expenses, parking fees or the amount you are required to spend on a uniform as long as you are not reimbursed for these costs. Just be sure to keep all of the records for such costs.
6. Know your organization. Unfortunately there are a lot of dishonest people out there who are looking for the opportunity to scam generous givers this time of year. If you are contacted by phone, email or even in person—do your research before donating. Be sure you know which organization will be receiving the donation and how much of your donation will be going towards them. It’s so important that you do your research. Call around and check on things BEFORE you give your personal information like account information or credit card numbers to anyone, even if they say it is for a charity.