Donating to charity has many benefits. It’s good for the charity. It gives you that warm fuzzy feeling for contributing to a cause you believe in. It also may reduce your tax liability. Read on for answers to some of the most asked questions.
Can I deduct charitable donations?
If you itemize deductions, you can deduct contributions to qualified charities. Not sure if you itemize? Usually, if you pay mortgage interest, have significant medical expenses, or have significant unreimbursed job expenses, you itemize.
What is deductible?
You can deduct contributions to a qualified charity. The charity will be able to tell you if they are qualified. In general, qualified organizations include: religious organizations, non-profit schools, hospitals, war veterans’ groups, Salvation Army, Red Cross, United Way, Goodwill, etc.
You may deduct contributions of cash as well as non-cash contributions such as stock, property, and other material items (clothing, furniture etc.). You may also deduct your out-of-pocket expenses including mileage (14 cents per mile).
You may not, however, deduct the value of your time or services. You also may not deduct contributions to groups that are run for profit, political groups (including candidates for public office), or chambers of commerce.
Can I deduct gifts to an individual?
No. However, you are able to give any individual $12,000 per year with no tax consequence. This means you are not able to deduct it, but they are not required to report it as income either. If you gift more than $12,000 per year to any one individual, you will be required to file a Gift Tax return.
Do I need to have reciepts?
Always keep track of all charitable donations (including the date, organization, and amount). If you give a donation of $250 or more, you will need a receipt from the organization. Most contributions over $5,000 require a written appraisal, so please see your tax professional if you are considering a donation of this size. Be sure to get a receipt for any amount of actual cash donated.
How do I know what my non-cash contributions are worth?
It is up to you to determine the fair market value of non-cash donations. One way to determine this is to go to a thrift store to get an idea what they will be able to sell your items for. Another way is to use software like ItsDeductible, which has thousands of prices built in. If you are contributing a motor vehicle, please consult with a tax professional.
Are there limitations?
There are limitations to the total deductible charitable contributions in one year. If you donate more than 20% of your annual income, please see your tax professional for tax planning. This usually only occurs if you are giving stock or other property. Also be aware that non-cash charitable contributions (clothing, etc) must be in good or better condition.
This article is intended to provide general information. Please see your tax professional for information specific to your tax situation.