By: Angelina Pyrkins
Giving to charity is a good feeling, and most people give freely without expecting anything in return. Even the most generous contributors will agree, however, that a break at tax time turns that good feeling into a great one.
In the United States, all tax deductions should be itemized on your IRS Form 1040, Schedule A. Make sure that you ask for a receipt for every charitable donation that you make, and keep an itemized list. Your contributions to charitable organizations can eventually add up to a sizeable deduction.
Like all things in life, charities can be good or bad. Most are worthy, legitimate organizations that rely on the donations of generous individuals. On the other hand, some “charities” are no more than crooks who are happy to take your cash and run. That’s why it’s so important to do your homework before making your donation. Ask for the group’s charitable organization number. It’s also a good idea to pick up a copy of the IRS Publication 78. This guide is available online and at most public libraries and provides a complete list of all charitable organizations that are recognized by tax agencies.
If you’re looking for a tax break for donations made to an individual person, a politician or a political organization, you’re out of luck. No tax benefits are available for these types of gifts. Additionally, you cannot claim a deduction for the time that you spend raising funds through activities such as raffles, casino games or bingo.
You don’t necessarily have to give cash to get a tax break. Deductions may be available for contributions of merchandise, goods or services. The amount of the tax break is based on the market value of the merchandise, goods or services donated. In other words, if your business donates a product valued at $200 to a local charity, you can claim a $200 tax deduction, provided that it is a charitable organization recognized by the tax agency. It’s also possible to receive a tax deduction for your donation of company stocks. The value of the stocks is based on the average high and low values on the date of valuation of the gifted stocks.
That old car in the driveway is another potential moneymaker. Get an appraisal of the vehicle, and you will be able to claim a tax deduction for the car’s market value at the time of your donation. Planes and boats may also be donated to charity for a tax deduction. Keep in mind that if the claimed value of the donated vehicle, boat or airplane exceeds $500, and the charitable organization sells the item, your tax deduction will be limited to the gross sale proceeds.
If you are donating a household or personal item, a deduction can be claimed on the amount that the item would have fetched at a garage sale or at a flea shop. To qualify for a tax deduction, a proper receipt is required for all charitable contributions over $250.
Whether you choose to donate cash or merchandise to your favorite charity, remember that only contributions made during the current tax year will qualify for a deduction. You cannot carry these amounts over to subsequent tax years, even if you have a credit card or bank account statement showing your contribution. The tax deduction is available only in the year that the donation was made.
Even if you give to charity without expecting anything in return, it’s a good idea to keep records of the donations you make throughout the year. Itemize them at tax time and treat yourself to a tax break. It will make you feel even better about the good deeds that you’ve done.
About the Author
Author Angelina Pyrkins is a columnist for a variety of Internet magazines, on home rental and home garden issues.