Charitable deductions and what you can claim

Do you happen to be the charitable type? Depending on which organization(s) you chose to donate your time, money, or goods to, you may be able to deduct those donations on your tax return. First and foremost, you’ll need to determine whether or not you’re going to choose itemization or standardized deductions for your return. This is a pretty simple step; just fill out a Schedule A. If you’re still unsure which direction to go or need further assistance, an accountant like myself can walk you through the steps on not only what you can you claim, but also if the organization you’re donating to makes you eligible to take that deduction.

Here are a few things to take into consideration to get you started on the right path to making your charitable donations work double time.

• Remember that in the eyes of the IRS, not all charities are created equal. Just because a person, group, or organization is asking you for charitable donations does not mean they have the approval or legal standing with the IRS to take your donations tax free. These organizations fall under the non-profit 501(c)(3) status, meaning they are tax exempt and your donations won’t benefit them personally. If you’re unsure of an organizations standing, you can find that information with the IRS, but usually most charities will offer that information up eagerly. After all, if you’re willing to give, they generally need your help!
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• Goods and services you may donate to an organization are also tax deductible. Again, the organization must be recognized by the IRS and qualify in good standing. If they meet the requirements set forth by the IRS, and as long as you’ve kept detailed and well documented proof of what you’ve donated or the services you’ve contributed, you’re allowed to deduct those items and services at fair market price. If you’re a contractor donating time to building affordable housing for example, or perhaps you’re donating some old furniture to the same cause, identifying how much your old sofa is worth is the only way to use it as an itemized deduction. The IRS only really requires a receipt if what you’re claiming to have donate exceeds $250, but you should hang on to all documentation anyway. Any true non-profit organization should be more than willing to give you an itemized receipt if you’re donating to their cause. A tax preparer will be able to instruct you on just what exactly you can deduct, and what you need to have documentation and paperwork to back up.
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• Supplies used in the making of goods, or organization of events such as fund raisers, auctions, or sales can be deducted also. Did you make cupcakes and cookies for a charity bake sale? All of the cooking ingredients you purchased can be deducted. Did you purchase decorations for a charity dinner out of pocket? Write those off too. In addition to these items, things like gas money to and from events that you’re volunteering your time at and even childcare costs (as long as you can prove you were volunteering your time while the babysitter was at home!) are eligible for deduction. Not sure exactly what you can include? Find a tax preparer to assist you!
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• There are limits on how much you can deduct. Most American’s won’t need to worry about the limit, however, as it begins when you donate more than 20% of your adjusted gross income. If you’ve found yourself in the position where you’re able to donate more than 20%, you’re only eligible to deduct up to 50% of your income.
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• You won’t be allowed to deduct donations made to any individual person(s), or political parties or candidates. Really this just ties back in with ensuring you know that the organization you’re giving to is a qualified group with the IRS.
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• Vehicles are another frequently donated item you can deduct. If the vehicle will be sold at auction, the charity you’ve donated it to will issue you a form 1098-c, which tells you the value the car sold for. If the value is over $500 you’ll most likely be able to deduct the amount the car was sold for. There are stipulations when donating a vehicle as well though. If the charity improved on the vehicle, or if it was given away to someone in need, you may be able to claim the fair market value of the vehicle. Find a tax professional for charitable deductions to help point you in the right direction.
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• It may not be obvious, but in order to claim any charitable deductions on your tax return, you have to go with the itemized deduction option. Otherwise the standard deduction is all that applies. You’ll also need to be sure to get all donations you plan on deducting in by December 31^st of the tax year. It won’t matter if the check you wrote for your chosen charity isn’t cashed until January 15^th of the following year, as long as it’s dated for the last day of the year you’re good to go.
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Having a generous heart can be beneficial to both whomever you decide to donate to, but can also give you a little bit of a reward on your tax return, too. As long as you’re careful to include the right kind of group to receive your charity, keep great records of everything you’ve donated, and keep an eye on just how much you’ve give, you’ll see the benefit come tax season. I’d love to help you hash out the details, so please give me a call at (609) 936-9336, or stop by my office at 1 N Rd #15d,  Princeton, NJ 08540 and meet me, Joe Gormley CPA, in person! You can also click on the link below to check out my profile.