Sure, the holidays are over, but that doesn’t mean the season of giving is. This time of year is one of the most popular times to contribute to charitable organizations and events. If you’re planning to donate to charities in the new year, there are a few things to keep in mind, especially since these contributions can benefit your tax returns.
Keep Records
First, if you’re filing as an individual, you must itemize your tax return in order to claim a charitable deduction. If you are itemizing deductions on your tax return, it is important to keep very good records of your charitable contributions. Be sure to collect any receipts you get and keep copies of the canceled checks. For any contributions of more than $250, a record of the transaction will be required to claim the deduction.
Not all charitable donations are tax-deductible, so make sure you understand what can and cannot be claimed on your tax return. Qualified organizations are eligible, but individuals or political organizations are not. To play it safe, most qualified organizations will provide a receipt.
Understand Large-Value Donations
If you are donating property (clothes, non-perishable foods, household items, vehicles, etc.), you will need to know the fair market value and the items must be in good condition before you can deduct them as contributions. Large property donations will require more IRS forms in order to be eligible. In addition, appreciation or depreciation of the property will need to be factored in. It is best to talk with your tax professional before performing any large-value property donations or claiming the charitable contributions on your taxes.
There are limitations on deductions for each type of gift based on your adjusted gross income. Cash donations will generally let you deduct up to 50% of your adjusted gross income. For property donations, you can usually only deduct up to 30%.
Taxes can be confusing, so if you to contribute to charity, it’s a good idea to understand all the rules. Consult with the personal tax experts of Ferguson, Timar & Company for more information about charitable tax deductions.