Plan Your Charitable Contributions Carefully

At this time of year, we’re all feeling even more generous than usual. It feels great to help out a favorite charity or two, and we enjoy the added incentive of a potentially valuable tax deduction for doing so. However, it is possible to lose that deduction if you don’t carefully follow IRS guidelines when making your donations, or even trigger additional tax payments if your return audited. Follow these rules carefully if you decide to donate to charity and want to claim a deduction.

Mind your calendar. If you want to claim a charitable contributions deduction toward your 2017 federal income taxes, you must make your donation by midnight on December 31.

Research your chosen charity. Not every charity is qualified by the IRS, meaning your donation might not be tax deductible. On top of that, plenty of very official-looking fake charities pop up around the holidays, as scam artists attempt to take advantage of our high spirits and good will toward others. Check with the IRS using their online search feature to ensure that your chosen charity is qualified.

Value your donations correctly. This part tends to trip up a lot of well-meaning people. Keep these rules in mind when recording your donations:

  • You can only claim the fair market value of donated household goods, not their original purchase price
  • If an item has appreciated in value since the original purchase (often the case with antiques and collectibles) then record proof of its value before donating
  • If you receive anything in return for a donation (for example, a meal or concert tickets), then you must deduct the value of that item from your donation amount

Keep proof of your contributions. This step is easy if you make a payment directly to the charity via credit or debit card. All you will need to supply as “proof” is your account statement. If you donate cash or household goods, ask for a receipt. Also keep copies of appraisals of items you donated, if you have them appraised first. Remember that paper copies can be lost or damaged, and back up everything tax-related in digital format as well.

Work with an experienced tax professional. As with any tax maneuver, the best way to claim complicated deductions is under the guidance of a tax professional. This person knows the ins and outs of the IRS requirements, and can work to ensure that you reap every deduction to which you are entitled.

Recommend
  • Facebook
  • Twitter
  • Google Plus
  • LinkedIN
  • Pinterest
Share
Tagged in
Leave a reply