Tis the season of giving, not only to your friends and family in reflection of the holiday season, but also to your favorite charitable organizations. Charitable giving is tax-deductible for both businesses and individuals. We’d like to see you make the most of your giving, so here are some tax tips to follow:
IRS-qualified charitable organizations
Qualifying charitable organizations are nonprofits, generally with a 501(c)(3) filing status. These include religious, charitable, educational, literary or scientific purpose groups, or groups dedicated to the prevention of cruelty to animals or children.
In addition to the groups listed above, you can also deduct contributions to the following organizations:
- Public purpose donations to local, state and federal governments
- Donations to nonprofit hospitals and schools
- War veteran groups
- The Salvation Army, CARE, Goodwill, American Red Cross, Boy Scouts of America, Girl Scouts of America and United Way
Get written records or receipts for all your cash, check and monetary gifts. If the receipt includes written communication from the organization, a payroll deduction or bank record with the date and amount of the contribution, that is sufficient. For contributions over $250, information on whether you received anything in exchange for the contribution is also necessary.
There are other types of donations that are tax-deductible besides cash. Vehicle donations, property, stock, clothing and household items all count as donations. The amount you can deduct is determined by their fair market value. Donations of your time cannot be deducted, but you can deduct any out-of-pocket expenses you incur while volunteering, as well as some of the mileage you incur driving to or from your volunteer activities. For businesses, event sponsorships or service donations qualify as charitable contributions.
There is a limit to the amount of money you can donate to charity each year. Many organizations only allow its donors to give 50 percent or less of their adjusted gross income. There may also be a limit to how much you can donate if your income is more than a certain amount. You can see the specific limitations to your tax-deductible contributions by viewing the corresponding section in the IRS publication 526.
Claiming it on your taxes
You can itemize your charitable contributions on Schedule A of your Form 1040. For donations valued at more than $500, taxpayers must complete section B of tax form 8283 and may need to have the items appraised for their fair market value.