Charitable Rewards for Your Good Deeds
Ever wonder if good things really do happen to good people? Sometimes, good things come in the form of tax deductions; and they can add up to great savings at tax time.
In the United States, all tax deductions should be itemized on your IRS Form 1040, Schedule A. Make sure that you ask for a receipt for every charitable donation that you make, and keep an itemized list. Your contributions to charitable organizations can eventually add up to a sizeable deduction.
Donating to charity is easy to do, but it does carry certain risks. The tax agencies will only grant tax deductions for contributions made to recognized organizations. Check to see if the organization is recognized by the tax agency before you make your donation. Look for the IRS Publication 78 for a full list of recognized charitable organizations. You can find this list at your local library, and it’s also available online. Take the time to research, and be sure that your money is truly going to a worthy cause.
If you’re looking for a tax break for donations made to an individual person, a politician or a political organization, you’re out of luck. No tax benefits are available for these types of gifts. Additionally, you cannot claim a deduction for the time that you spend raising funds through activities such as raffles, casino games or bingo.
You don’t necessarily have to give cash to get a tax break. Deductions may be available for contributions of merchandise, goods or services. The amount of the tax break is based on the market value of the merchandise, goods or services donated. In other words, if your business donates a product valued at $200 to a local charity, you can claim a $200 tax deduction, provided that it is a charitable organization recognized by the tax agency. It’s also possible to receive a tax deduction for your donation of company stocks. The value of the stocks is based on the average high and low values on the date of valuation of the gifted stocks.
You may also receive a tax break by donating a vehicle. The amount of the deduction will be based on the vehicle’s resale value at the time of donation. This is also true of planes and boats donated to charity. However, if the claimed value of the donated boat, plane or motor vehicle exceeds $500, and the item is sold by the charitable organization, the tax break is limited to the gross proceeds from the sale.
If you are donating a household or personal item, a deduction can be claimed on the amount that the item would have fetched at a garage sale or at a flea shop. To qualify for a tax deduction, a proper receipt is required for all charitable contributions over $250.
Be sure to claim your tax deduction in the same year that you make your donation. It doesn’t matter if you have a check or credit card statement that proves your donation. If it’s from a previous year, you won’t be able to claim the donation. These amounts cannot be carried over to a new tax year.
Even if you give to charity without expecting anything in return, it’s a good idea to keep records of the donations you make throughout the year. Itemize them at tax time and treat yourself to a tax break. It will make you feel even better about the good deeds that you’ve done.
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