As Thanksgiving and Christmas draw near, many people think about making charitable donations – for both altruistic and tax reasons.
For people who don’t take the standard deduction on the 10-40 form but itemize instead, items like donations to charities can help reduce the amount of money you owe to the government. So, if you’re looking to shave a little off the amount of tax the IRS will collect, there are a few important things to keep in mind.
Make a qualified gift. Make sure the organization you’re giving to is a nonprofit and your gift qualifies for a tax deduction. Most organizations state on their websites or advertising if donations are tax deductible.
Keep records of your giving. To qualify for a tax deduction, the government will require some type of record. According to TurboTax, that can be a receipt, a canceled check, or a bank statement showing the charity’s name for a debit or credit card donation.
Not all qualified donations are in cash. You can give goods like clothing or furniture to thrift stores and other tax-exempt organizations. For goods, you can claim a donation of the fair market value of the goods donated (in other words, you can’t use the price of a new item as your claim for a three-year-old used item). Just like when donating cash, you’ll need a receipt from the organization for the donation. If the value of the item exceeds $250, you’ll need some record from the organization proving the value of the donation and that you didn’t receive any services in return.
Even volunteering has benefits. You can’t deduct anything for the amount of time you put into volunteering, but according to TurboTax, you might be able to deduct your mileage. If your driving benefits the charity – say, making deliveries or picking up supplies – you can deduct the mileage. It may not be much, but every little bit can help.
Of course, the best reason to give is simply because of the need of organizations you believe in. But if the government is willing to give you tax breaks, this is a good one to take advantage of.
