Donating is popular throughout the United States and many people give to their favorite organizations throughout the holidays and year as well. If you enjoy the gift of giving and you plan to make some charitable donations this year, it is important that you plan properly for your taxes.
Did you know that you can deduct the amount that you do donate? That is right; you can. Many people enjoy the small deduction as it helps them when they are filing.
Below, we will go over some tips to help you properly donate and deduct all of your charitable donations.
Choose Wisely and Itemize Your Taxes
When you donate to a charity, make sure you get a receipt or invoice that shows the amount you donated. You will find this information comes in handy later on down the road.
When it comes time to fill out your taxes, you will need to itemize. In fact, there is a specific section that you can fill in on your tax form.
Before you choose the organization you want to donate to, make sure that they are not on the IRS exempt list. This list contains all of the organizations that do not qualify for you to take a deduction for.
Payroll Charitable Deductions Count Too
If you donate to an organization through a deduction on your paycheck, you can claim this deduction on your taxes, but you must retain your payroll stub to show that you did make the donation.
Volunteering and Time Donation Does Not Count
Volunteering at local organizations and donating your time to charities does not count as a donation on your tax return and you cannot claim it. For example, if you spend 30 hour donating your time to clean a nursing home, you cannot deduct an hourly or set amount on your tax return for the work you did.
Obtain Written Acknowledgements
If you have donated to an organization or to a company and the amount was under $250, you need to have proof of the donation in the form of a bank statement, a letter from the organization, or something similar.
Not having this information on hand can mean that you are ineligible to claim the donation on your taxes.
Items You Can Donate
If you are looking for items to donate to a charity organization, there are a few different things you can give. You do not only have to pledge money, which is one of the benefits of donating. In addition, you can claim physical items as a donation on your taxes as well.
Appreciated Items
Stocks and other financial investments can be given as a donation to charity organizations. In addition, you can send over mutual funds and the like and still receive the charitable tax donation credit on your tax return.
One thing to keep in mind when sending appreciated items is that it can take some time for the name change to take place on the account and you may still be in control of the fund until it officially switches over.
Furniture
You can donate furniture to any local organization or charity organization that accepts these types of donations. When you are done using an item, it will pay off for you to donate it. For instance, if you donate a refrigerator and it sells for $200, then you can write off that $200 on your tax return.
Vehicle
There are many charity organizations that allow you to donate your working vehicle to a family or person in need. In addition, you can also donate your vehicle to a charity organization and when they sell it for the cash, you deduct the amount that the vehicle sold for.
If you have items that you no longer want or need, you can donate them to charity and it will benefit both you and the charity in need. You can claim all donations on your tax return given that the donation was made in good faith and the charity is not on the exempt list at the IRS.
If you are having trouble figuring out whether or not a donation can be claimed on your tax return, speak to your local tax professional as they can work with you and guide you in the right direction.
Financial Balance LLC