Facts You Must Know About Deducting Charitable Donations


Millions of Americans contribute to charities every year. While donating does make you happy about making a difference, there is much more that it can do for you. One of the key benefits of charitable donations is that they can reduce your tax burden to a considerable extent. No wonder, there is a spike up in donations at the end of the tax year. However, you cannot expect tax benefits from every single donation that you make. As with everything else in tax laws, you need to follow certain rules to claim deductions for charitable donations as well. Here are some tips that you can follow to avail the best advantage by donating to charity.

Only donations to qualified charities are eligible for a deduction

The most important fact that you should know while making a donation for claiming a deduction is that every donation won’t count. You need to donate only to an organization while qualifies as a true charity to claim a legitimate deduction. For example, donations to political organizations, social clubs, fraternal societies, business leagues, and several other entities do not count even if they qualify for nonprofit status. Ensure that you do a fair bit of research to verify whether your donation would go to a qualified charity listed by the IRS so that it is tax-deductible.

Donations to individuals do not count

While you need to be selective about the organizations you donate to, remember that donations to individuals will not help. You cannot get any deduction for contributions made to individuals, no matter how much they need them. If you are considering helping a homeless person or someone who is really sick, you will not get any deduction for the charity. Consider helping such people through a qualified organization of doing it is really important to you.

Get a receipt for all donations

Make sure that you gave a bank record for every donation, even if it is done in cash rather than a check or credit card. You must have everything in writing from the organization. Seasoned tax attorneys recommend that the receipt must include the amount of donation along with its date and details of the organization you have helped. You must have an acknowledgment of the contribution from a qualified organization if claiming a deduction for a contribution exceeding $250 in value.

You need to itemize deductions for claiming benefit for a donation

Don’t expect to get the deduction for the donations you make unless you itemize deductions on your tax return. If you take the standard deduction, don’t expect any tax benefits from the donations you make. A little extra effort while filing your return can help you save up on taxes. So you must absolutely itemize your deductions if you want full value from charitable giving. Whether you manage finances and file returns yourself or get it done from a professional, do ensure that you are sorted out with the itemization of deductions.

You may require more documentation for gifts of property

While cash donations require proper receipts if you want to claim deductions for them, gifts of property are no exception. If you are donating property to charity, you can claim deduction for its fair market value. But this rule is valid on the basis of the value of the property. For example, you will need to complete the IRS Form 8283 for claiming deductions of $500 or more. A qualified appraisal of the property is mandatory for claiming a deduction exceeding $5,000. Gifts over $500,000 in value require the attachment of the appraisal to your tax return.

Pay attention to the calendar

The value of donations does have a considerable impact on the deduction you can claim. But you need to pay attention to their timing too because charitable contributions are deductible only in the year you make them. Simply speaking, you can get deductions in a specific year for only the donations you make by December 31 in that year. You need not consider only cash donations out of your account to calculate the timing of the deductions. Credit card charges, for instance, maybe counted as deductions within the same year you donate even while you have not paid them off.

Now that you understand how you can leverage charity for tax savings, you should consider donating wisely. The idea is to find the options that give you the happiness of having helped someone but, at the same time, enable you to make savings on your taxes.