The Time is Now to Think About Charitable Contributions
As December gets underway, you might be feeling both joyful and generous. Charitable organizations know this, and ramp up their solicitations at this time of year. Giving to charity can feel good and make a difference in the world, but it can also make a difference toward your tax liability for the year. That’s because the IRS offers a valuable income tax deduction for charitable contributions, if you claim your gifts correctly.
So, how do you go about claiming the deduction “correctly”? Follow these steps.
Investigate your chosen organization. You can’t claim the charitable contributions deduction for simply giving money to anyone. You must donate to a charity that is qualified by the IRS, and unfortunately there are plenty of unqualified (and even fraudulent) charities out there. Enter the organization’s name on the IRS’s search function for qualified charities, to ensure that your gift will count as a tax deduction.
Value deductions correctly. If you simply donate money, that makes this step easy. However, if you receive anything in return for your donation (such as an item you win at a charity auction), then you must deduct the value of that item from the total amount given.
If you donate household goods, you can claim the actual, current market value of those items. But you can’t claim their original purchase price. In some cases, you might donate items that have actually appreciated in value, so you can certainly claim the now-higher value. Just remember to keep a copy of any appraisals.
Ask for a receipt. If you donate cash or household goods, make sure to ask for a receipt from the charity. If you donate by credit card or debit card, you can skip this step. Your account statement will suffice as proof.
Keep proof of donations in a safe place. As with any other important tax documents, store your receipts and appraisals in a safe place. Better yet, upload digital copies to a cloud system as a backup to paper copies.
Donate by December 31. That’s the deadline if you want to claim the deduction on your 2017 income tax return.
Work closely with your tax professional. In some cases, the charitable contributions deduction can become more complicated. Work closely with your tax professional in order to claim this, or any other deductions, correctly.