People who give to charity do so generously, without a tinge of “what’s in it for me”. But even the most earnest philanthropists will concur that a tax break can make the good feeling you get from giving, even better.
When you contribute to your favorite charity, ensure to let the tax agency know. Charitable tax deductions are legitimately and readily available to you. Your donations to charitable organizations can add up to a sizeable deduction when you itemize them on IRS Form 1040, Schedule A.
Before you make any endowments, be sure to carry out a few checks. Remember that only donations made to organizations that are acknowledged by tax agencies are eligible for tax deduction. Refer to the IRS Publication 78 for the entire list of all recognized charitable organizations. Check your public library or search online to view this list.
Tax benefits are not available on donations made to individuals, political organizations or political leaders. Further, you cannot claim a tax break for time spent raising money for organizations by holding bingo, raffles, or any other games of chance.
Tax deductions are available on contributions made in the form of goods, merchandise, or services. This deduction must be declared on the fair market value of these goods or services. For instance, you may choose to donate by gifting stocks of your company. In this case, the value of the donated stocks will be estimated as the average of highest and lowest traded prices on the date of valuation.
You may also obtain a tax break by donating a vehicle. The sum of the deduction will be based on the vehicle’s resale value at the time of donation. This is also true of boats and planes donated to charity. However, if the claimed value of the donated plane, boat, or motor vehicle exceeds $500, and the item is sold by the charitable organization, the tax break is limited to the gross income from the sale.
If you are donating a personal or household item, a deduction can be claimed on the total that the item would have fetched at a flea shop or at a garage sale. To meet the criteria for a tax deduction, a proper receipt is required for all charitable contributions over $250.
Only contributions made during the tax year will be eligible for a deduction. If you have issued a check or used a credit card, it does not matter what date the transaction shows on your account. You can apply for the deduction only in the tax year that you made the donation.
BBQ fan? Check out the world's best BBQ gloves.
Even if you don’t expect to get anything in return for your benevolence, go ahead and keep a list of your charitable donations. The tax department will be grateful for and reward your generosity.
Filed under: Buy A Car