The holidays are here, and many of us are in a festive and giving mood. In addition to exchanging gifts among family and friends, many taxpayers like to make contributions to charitable organizations around this time of year to help those in need.
Donating gifts to charities is a fantastic way to lend a helping hand to underprivileged families and cheer them up during the holiday season. There are so many children whose families cannot afford gifts at the holidays, and many of them never get the chance to open presents. The same goes for adults and others in dire financial situations. By donating a gift to a charity, it can give you that good feeling inside knowing that you are making a difference in the lives of others. Another perk to this is that these donations also come with IRS tax deduction opportunities.
Qualifying for the Tax Deduction
As an American taxpayer, you have the ability to receive tax breaks by contributing to certain charitable organizations and nonprofits at the holidays. This means you won’t have to pay taxes on these items you donate. To qualify for the deduction, you must document and itemize each item to make the IRS aware of exactly how much you spent on gifts. Documenting cash donations is even more important. You must have written documentation about the donation along with a description of any other property donated if the total amount is or exceeds $250.
In addition to the donation amount mentioned above, items must also be given to qualified charitable organizations in order to qualify for this IRS write-off. Because of this, taxpayers may want to consider giving to reputable organizations that have been around for some time. Donated items such as stuffed animals, plastic toys, electronics, and clothing items should be in good condition or better to qualify for deductions. The IRS provides specific information on which charities are considered qualified.
Deducting Donated Vehicles
Along with deducting smaller items contributed to charities, there are tax breaks available for donating used vehicles to certain organizations as well. In general, the IRS allows for the use of two basic methods to determine the deduction amount for donating a used vehicle. One of these takes into account how much a charity sells a car for in the future after it was donated. The other method accounts for the fair market value of the vehicle, which is often found through car listing services like Kelly Blue Book. Vehicle donors should obtain a written acknowledgement from an organization to include with their tax returns. Plus, each charity has its own unique rules on the condition of a car prior to accepting it. Be sure to check with your charity of choice for further details.
To learn more about how you can reduce your IRS taxes through the donation of various items to charities at the holidays, contact 1-800Accountant at 1-888-749-0117 or at www.1-800Accountant.
Photo credit: The image of the donation box is used with permission via the Creative Commons license through Flickr.