We all know it is better to give than to receive. And, of course, the point of giving to a worthwhile cause is not expecting anything in return. Nevertheless, there are financial benefits to charitable contributions when you file your taxes. Here are a few tips & guidelines regarding taxes and charity.
WHAT IS DEDUCTIBLE?
The IRS doesn’t allow deductions for funds given to specific individuals or families. Meaning, if you give a friend in need some money to help them pay for a medical issue, it doesn’t apply. The contribution has to be to a qualified organization, such as the Red Cross, public schools, churches and many other non-profit organizations. If you have a question a group’s tax-exempt status, contact the IRS online or call 1-877-829-5500.
KEEP DETAILED RECORDS
If you deduct charitable donations on your return, you’ll need more than just a scribbled note on a napkin. There should be a written communication from the organization, including its name, the date and the amount you contributed. Detailed receipts will ensure you have accurate data and are invaluable in case of an audit.
HOW MUCH CAN I DEDUCT?
You can actually deduct up to 50% of your adjusted gross income when it comes to charitable contributions. It’s one of the few itemized deductions that doesn’t have a floor, or lower limit, meaning you get to deduct every dollar that you give to qualified organizations until you reach half of your income level. Every dollar that you donate to charity beyond that 50% of your income will still give you warm fuzzies, but you don’t get to deduct it on your taxes.
IT’S NOT JUST ABOUT MONEY
Cash contributions aren’t the only things that can lower your tax bill. You can also deduct the value of donated clothing, furniture, vehicles and more. To do this right means you have to get a receipt when you donate and determine fair market price of the item — which is, essentially, a reasonable price if you were selling it. There are also cases when you can deduct the cost of travel to and from a place where you volunteer your time, the price of a volunteer uniform and other endeavors.
Please remember that this article is for information only. We recommend consulting your tax advisor with questions regarding specific deductions and charitable donations. However, if you want to start donating today, the America First Community Assistance Program is a wonderful — and tax-deductible — effort you can join. Simply log in to your online banking account and make your contribution.