5 Steps to Your Charitable Tax Deduction
Filed under: Taxes and Planning
Toward the end of the year, many of you might be thinking about giving to charity. It feels good to give to charity, and you can make a real difference in your community. But there’s one more important benefit: You can earn a significant income tax deduction!
However, as with all tax-related concerns, you must follow IRS rules precisely. Take these five steps now to ensure that you will receive the most deduction for your money.
Do your research. You can only count charitable donations made to qualified charities, so make sure the organizations you consider are on the IRS list. Remember that many con artists establish fake charities at this time of year, to take advantage of the abundance of goodwill. You want to make sure your donation counts, and that you can claim your rightful deduction on your taxes.
Value your donations correctly. Remember that when donating household goods, you can only count the fair market value of the used items – not their original purchase price. If you donate an item worth 500 dollars or more, keep a copy of a qualified appraisal to prove the item’s value. Also, if you receive anything in return for your donation, you must deduct the value of that gift or prize from your donation amount. Keep this rule in mind if you attend charity auctions or sales.
Keep your receipts. When you donate money or household goods to charity, always ask for a receipt! It should show the name of the charity, the date of your donation, and the amount. Remember that in the event you are audited, you will be asked to provide proof of charitable donations. Keep these receipts in your files for three years. If you make cash donations via credit or debit card, your account statements can serve as proof. Your pay stubs can also be used, if you signed up for automatic payments via your employer.
Make your donations now. In order to be counted toward your 2015 tax return, charitable donations must be made by the end of the year. You can even count payments made by credit card, even if you won’t pay off the charge for a while, as long as you make the donation by December 31.
Set a budget for next year’s charitable donations. To make things easier on yourself next year, sign up for automatic payroll drafts to your favorite charity. Or, set up monthly payments to be billed to credit card. That way, all of your records are in one place where they are easier to gather next year.
If you have any questions about charitable contributions and tax deductions, call our office and we will be glad to help.
15176 – 2015/12/10