Take Advantage of the Tax Deduction for Charitable Giving
If you have the means to give to charity, it is nice when you find a cause that you can support with either time or money. Another benefit of donating money or goods to charity is the tax deduction. There are some times that you give to charity, and you may forget to get a receipt so that you can make a deduction. Most charities will mail you a form if you sent in a monetary donation, but you can also deduct goods that you donate.
Itemize to Claim the Donation
If you itemize on your taxes, you can deduct the amount you give to charity. There are specific rules you need to follow when you make donations to charities. The biggest requirement is that the charity be recognized as a qualified organization by the I.R.S. Most major charities that people talk about such as United Way and Goodwill qualify. Churches and religious organizations qualify as charities, as well. If you give money to an individual or to a foreign organization or business it will not count.
When it is time to file your taxes you will need to file form 1040 and use schedule A to make the deductions. If you use an accountant, you simply take the receipts that you have collected for your deductions with you when you file your taxes. If you use computer software, they will ask you for the amount of your deductions as part of the program process. You will need to keep the receipts on file in the event that you are audited. Even though you will not be able to claim these deductions unless you itemize, it is a good idea to begin saving the receipts every year, since you will need to once you begin itemizing.
Additionally, you may not realize that you are going to itemize until the year is almost over, when you first begin itemizing.
Collect Your Receipts
There are specific rules about the way that you claim the items on your taxes. If you give goods to an organization like Goodwill, you will need to receive a receipt in order to claim the deduction. If the amount is for more than $5,000, you will need to have items appraised professionally in order to make the claim. You will also have to list the prices at fair market value, which means it would be what you would get if you sold them, not the amount you paid for the item new. There are websites online that can help you to estimate the amount that you are donating.
If you spend time volunteering your time, you cannot claim that on your tax return. However, if you buy items to use while you are volunteering, you are allowed to claim out-of-pocket expenses. You will need to keep a copy of the receipts of the purchases when you file your taxes. If you are reimbursed for the expenses, then you cannot claim them when you file your taxes.
Know the Exceptions
Although your cash donations can be claimed on your taxes, it is important to realize that any donations that you make to a charity that involve you receiving something in return mean you cannot claim the full donation. You have to deduct the amount of the product that you purchased. Additionally, you cannot deduct any raffle tickets that you purchase throughout the year.
Don't Forget Your State Income Taxes
Some states may allow you to make above the line deductions for charitable giving as well, so even if you do not usually itemize, if you hold onto the receipt you may be able to benefit when you file your state taxes. If you are using software to file your taxes, the software will use the information you use when filing your federal taxes to determine if you qualify for the deduction. This means that even if you know you will not qualify for the federal deduction, you should still enter it into the software or tell your tax accountant about your donations.