Helping Others Catch a Break and Enjoy Tax Breaks With the IRS

Charitable Giving and Donation Tax Tips

If you’ve been donating money or resources to charitable causes, you may never see the ripple effects of your giving. However, in addition to the warm, fuzzy feelings that accompany doing something good for someone else, you might also receive a tangible benefit during tax season. If you’ve given to a qualified charity, you or your business is eligible to include your gifts as itemized deductions.

How to Claim

Charitable cash contributions can be claimed on Schedule A of Form 1040 from the Internal Revenue Service. They must be itemized on lines 16 to 19, and your written records or canceled checks need to confirm where you donated, the cash amounts and the date of the transactions. If you made noncash donations such as furniture or food totaling more than $500, you’ll need to complete Form 8283 and include it with your tax return.

Before you even decide to itemize the donations, it’s important to figure out whether that would be a profitable decision for you. If the combination of your allowable expenses, including mortgage interest, medical expenses, charitable donations and the like are not more than the standard deduction for your filing status, then itemizing your donations will not provide any added benefit. Yet, if your giving spirit has caused the amount to exceed your standard deduction, then it’s worth the time to fill out the additional tax forms.  

It’s also important to note that there is a limit to how much you can deduct when it comes to charitable giving. The standard guidelines are that you can deduct cash contributions up to 50 percent of your adjusted gross income (AGI), donations of certain capital assets to qualified charitable organizations up to 30 percent of your AGI and donations of capital assets to certain non-50% charities such as family-controlled private foundations  worth up to 20 percent of your AGI.

What to Claim (And Not to Claim)

Once you’ve made up your mind on where to donate your money and resources, there are ways to distinguish between what can and cannot be claimed as a deduction according to the IRS. First, the organization you are donating to must have obtained a 501(c)(3) tax-exempt status. Donations to individuals, political parties, and for-profit organizations are considered personal expenses and therefore cannot be included as a deduction. Another common question is whether volunteer time can be deducted. Unfortunately, time cannot be deducted, but you can deduct expenses for items used while you’re volunteering including tools and gas.

If you’re planning to give anything from food and furniture to a vehicle, be sure to get a written acknowledgment of your donation. You’ll need certain items valued in their current condition, and it never hurts to snap a picture of your donation. If the charity is the one using the car, you can deduct the vehicle’s fair market value on your return.

With so many moving parts and dozens of deductions to think about as an individual or business owner, we encourage you to make life easier with our premier bookkeeping tools. Keeping track of costs and donations online will help you avoid losing receipts and distinguishing between personal and business expenses.

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