The holiday season is when a lot of us tend to give to charity. The purest giving always comes from the heart, but it’s important to remember the potential tax benefits of charity donation.
Most charity donations, whether money or goods, can be deducted from your taxable income. A check you write to the Salvation Army or a box of books you donate to Goodwill would both qualify. However, be sure to follow a few rules when you donate.
1. Investigate the Charity
The IRS only recognizes donations to approved charities, so do your homework before you pull out your checkbook. To ensure that you’re dealing with a legitimate organization and that you can claim the deductions you’re looking for, visit the charity finder on the IRS website to make sure your chosen charity is registered.
2. Keep Good Records
You’ll need to provide the IRS with records of your donations. Most charities offer receipts (and be sure to ask for one if they don’t). If you’re donating old clothes, estimate the secondhand prices that the items are generally sold for, and use those numbers to figure out your deduction. If your donation is between $250 and $500, the IRS requires a receipt and a verifying written statement from the organization. For anything between $500 and $5,000, you’ll need to fill out Form 8232 from the IRS. Anything over $5,000, such as a car, may require all of these things, plus an appraisal from a qualified third party not affiliated with the charity.
3. Talk to a Tax Professional
You can use a charity calculator to estimate you tax savings, but as with any financial plan, it’s probably a good idea to consult an expert, such as your preferred tax professional, before you claim your charitable deductions. Most tax experts can help you figure out the tax implications of your donation and help you get all the necessary paperwork in order. And as Get Rich Slowly Points out, the cost of talking to a tax professional might even be deductible.
If you’re looking for an easy way to give money to charity, consider saving up a year’s worth of Ally Perks money in a Money Market or Online Savings account, and donating that money at the end of the year. Even if it’s a sum you’d consider a relatively small amount, to a charity, every penny counts.
Will you be giving money or goods to charity this holiday season? What are some causes you intend to support?