Everything You Should Know: Tax Benefits for Charitable Giving

The spirit of giving is upon us! With Thanksgiving and the holiday season right around the corner, now is the time to tap into your inner generosity and make a positive difference to local charities. Not only will your donation help those in need and make you feel warm on the inside, but charitable donations come with special tax benefits. Keep these in mind when donating:

Not All Charitable Donations Qualify for a Tax Deduction

First of all, understand that not all charitable donations qualify for a tax deduction. Donations are deductible as long as it is made to a qualifying organization (just because an organization is exempt from taxes does not mean it qualifies). Similarly, donations made to foreign governments or charities are not eligible.

Decide Whether to Itemize Your Tax Deductions or Keep Them Standard

In some cases, you must itemize your charitable tax deductions. If you do, you must make sure that the total deductions are greater than the standard deduction. If not, keep it at a standard deduction (our team can help determine this!).

Take Note of the Year You Make the Donation

With charitable year-end giving, the date of the donation can get a little blurred. Remember, the day you make the payment (i.e., you put the check in the mail or the donation is charged to your credit card) is the year in which the contribution is deductible. This holds true even if you pay the credit card bill after the first of the year.

Note the Deduction Limit

Chances are pretty good that you will not need to worry about the limit on charitable giving deductions. However, it is important to note that if you donate more than 20 percent of your adjusted gross salary, a limit may apply. If you donate to a public charity, the deduction is limited to 60 percent of your contribution base. (But serious kudos for having a big heart!)

Keep Records Well-Documented

As with all tax records, it is crucial to keep appropriate documentation of charitable donations. If you are audited, you must prove to the IRS that you did, in fact, make the donation and that you also did not receive anything in return for the donation. Keep on hand a canceled check, credit card statement, bank statement or a written acknowledgment from the organization.

Charitable giving is a wonderful way to contribute to the many fantastic nonprofit organizations in our society, but it can also be confusing when tax season comes around. Talk to our qualified team of accountants today to ensure your ducks are in a row.