Tax Deductions for Charitable Donations
Charitable donations can make a big difference in your favor on your tax return. As long as you itemize your return, the IRS allows you to deduct the charitable donations you make throughout the year, which can help reduce your taxable income and lower your tax debt. All this, while helping a worthwhile cause!
Here are some tips for making sure that your charitable donations qualify as a tax deduction on your next return:
- Your charitable donation must be cash or property to qualify as a deduction. Your pledge or promise to donate does not count. You cannot deduct until you actually donate!
- Claim your tax deductions on Form 1040 (Schedule A).
- The charitable organization must be a qualified tax-exempt organization. The charity will be able to tell you that they are tax exempt (normally they can provide their 501(c)(3). Churches and other religious organizations may not have a 501(c)(3), but they are still considered a tax-exempt organization.
- You must itemize your deductions on your tax return to be able to deduct charitable donations. If you take a standard deduction, you will not be able to deduct your contributions to charitable organizations.
- You must keep detailed records documenting your donations. This generally includes receipts or letters from the charity acknowledging the donation, canceled checks, bank statements and information that verify the value of any donated property.
If you happen to be audited and do not have this written documentation, the IRS can elect to disallow your charitable contributions over $250, which means you may owe them more money. Keeping good records is one of the most important things you can do to make sure that the IRS does not question your deductions.
- You can make cash donations up to 50% of your adjusted gross income and make property donations up to 30% of your adjusted gross income.
What Kinds Of Donations Are Not Tax Deductible?
You may wonder if there are kinds of donations that are NOT tax deductible. As you might expect, the answer is yes. You cannot deduct donations made to an individual person, a donation to a political party or campaign or to for-profit schools or hospitals. You also cannot deduct contributions made to labor unions or business associations. Finally, you cannot deduct an amount of money that you think corresponds to the value of your time spent providing services to a non-profit.
Get Help With Your Annual Return
If you have questions about potential deductions, itemizing your deductions or anything else relating to your annual tax return, contact Success Tax Relief for help.
Our team of tax professionals handles a wide variety of tax questions every single day of the year and are committed to helping you solve you individual tax issues in a way that maximizes the benefit to you while minimizing your payout to the IRS.