With the year-end quickly approaching, it’s a good time to start planning your charitable donations. Donating not only allows you the opportunity to help others in need, it can also provide you with tax benefits.
The following are guidelines to help you maximize your tax benefits:
- Charitable contributions are only deductible if you itemize your deductions on Form 1040, Schedule A. Your itemized deductions must be greater than the standard deduction available to you depending on your filing status and other factors.
- For a donation to be deductible, it must be given to a qualified tax-exempt organization. Donations to individuals are never tax deductible. To determine if an organization is tax-exempt, you can ask the organization or go to www.irs.gov, and use the “Exempt Organizations Select Check” tool. Donations must give the organization full control over the funds. If you specify an individual within the organization to receive the benefits, it is not considered a tax deductible donation, but a gift to the individual.
- When you donate and receive something in return, only the portion of the donation that is greater than the fair market value of the benefit you received is deductible. For example, if you donate $100 and receive a ticket to an event worth $25, you can only deduct $75.
- Non-cash or property donations are usually deductible in the amount of their fair market value; however, there are exceptions. All non-cash donations greater than $5,000 require a qualified appraisal.
- Volunteering does not result in a direct tax deduction, but some of the expenses you incur while volunteering are deductible. Examples include travel expenses and uniforms.
- One of the most important aspects of donating is to keep proper records to substantiate your contribution.
Donations of $250 or less require either a bank record, written receipt, or letter from the qualified organization.
Donations of $250 or more require a bank record or written receipt, AND an acknowledgement from the organization stating the amount of cash contributed, if any benefits were received, and a description of these benefits.