Making a charitable donation, of cash or goods, is an excellent way to reduce your tax burden. The IRS rewards your generosity to worthy organizations with the ability to deduct the amount, or value, of your donation. To make doing your taxes a breeze, and to ensure you get to deduct every donation possible, you should know these tips:
1. Document your donations
It’s essential that you save canceled checks, credit card receipts and any written receipts from the organization, no matter how large or small your donation. Records should include the amount, date, name and address of the recipient. For donations in excess of $250 you’ll need to have both a bank record and receipt from the organization. It’s a good idea to place this documentation in an envelope or file folder so that you don’t accidental lose a receipt during the year.
2. Double check the organization’s tax-exempt status
While you’re certainly free to decide who gets your money, if you want to take a charitable deduction on your taxes remember that this can only be done if the organization is qualified by December 31 of the tax year. To find out if your favorite organization qualify, check the IRS website and use the Exempt Organizations Select Check tool. By checking the charity before making a donation you’ll prevent yourself from falling prey to clever con artists who set up fake charities and use the holidays as a way to get rich quickly.
3. Use your credit card for last minute donations
Did the busyness of the holiday season keep you from sitting down to write out checks to your favorite charities? Don’t worry; as long as the New Year’s ball hasn’t dropped, you can make a donation by credit card, even if you don’t actually pay the bill until the next year. One of the best ways to see if. Alliteratively, you can also write and mail a check on the last day of the year as long as the check is dated accordingly.
4. Your time is priceless
While giving of your time is a great way to donate when your finances don’t allow you to give money, the IRS doesn’t allow you to place a value on your time. However, you can use any expenses incurred–transportation costs, lodging, meals and any materials you purchased for the volunteer activity–are deductible. Remember to keep all your receipts as proof and keep them in their own envelope to make filing taxes as simple as possible.
5. Donate your unneeded items to charity for a donation
Another way to give without spending any money out of pocket is to donate your used books, clothing, household items, sporting goods, toys and furniture to a local charity. You will need to get written documentation for the donation if the value is in excess of $250.
6. Deductions can only be taken if you itemize
It’s essential to remember that you can only claim these deductions if choose to itemize your deductions, rather than opt to use the standard deduction.
By remembering, and using, these tips you’ll be able to make the most of your hard-earned dollars so that they go to a good cause and reduce your tax liability. Be sure to consult with a tax professional if you have any questions about current tax law.
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