GIVE TO CHARITY
Charitable giving allows taxpayers to reduce their annual tax bill while supporting a cause they believe in.
Each tax season, charitable donations rank among the most common tax deductions used nationwide, and for a good reason. Charitable giving allows taxpayers to reduce their annual tax bill while supporting a cause they believe in.
How do I find qualified charitable organizations in my area?
Looking for a local or national charity? Check out the website Charity Navigator or Charities.org to find a charity that aligns with your passions. A few common causes to consider supporting are: ending childhood hunger, providing animal welfare, reducing homelessness, supporting veterans, and funding cancer research.
Use the IRS’s qualified organization search tool to check if your desired organization will qualify you for a deduction. Although the tool may seem overwhelming (what’s an EIN number?), all you need to do is enter your city and state and hit “search”. All qualified organizations in your city will appear on the results page.
Which Donations Can I Deduct?
Deducting your donations may not be as simple as you think. Per the IRS, deductible charitable donations include contributing money, goods, or services to qualified organizations. The “qualified organizations” caveat was added to prevent taxpayers from taking advantage of the broad definition of “charitable contributions” — for example, attempting to deduct gas money given to a friend.
Financial donations are the most straightforward type of charitable donation. Taxpayers typically make financial donations by cash, check, or card. However, donating money through payroll deductions or recurring withdrawals from a bank account is also possible. If you seek to claim donations on your annual tax return, some record-keeping is involved; you must track both the category and the donation amount.
For money donations of less than $250, you must procure proof of the transaction via a receipt or a bank statement. Your bank records must corroborate the recipient organization, the transaction date, and the donation amount. To claim more than $250, you must procure a written acknowledgment of the relevant donations from the recipient organization. This acknowledgment must detail the exact dollar amount of the donation and whether it was a quid pro quo donation (more on that later). If the donation was on a quid pro quo basis, the acknowledgment must include a fair market price valuation of the donor's benefits.
When most people think of charitable giving, they picture money donations. However, donating goods and services is also very popular — and very deductible. People commonly donate unused clothes and household items to thrift stores. When deducting these donations, you must use the item’s fair market value — typically, you will get this figure from the thrift store when they process your donation.
Things get a little more complicated if you were to donate a vehicle with a fair market value exceeding $500. There are two figures to choose from: the vehicle’s fair market value at the time of donation and the gross proceeds from the organization’s sale. You must select the smaller of the two figures. Taxpayers claiming more than $500 in non-cash contributions in a single year must file IRS Form 8283 alongside their tax return.
Can I Deduct “Quid Pro Quo” Donations?
Put simply, quid pro quo donations are charitable contributions that come with a tangible benefit to the donor — other than the warm, fuzzy feeling of doing a good deed, of course. To be considered a quid pro quo, the benefit must have a quantifiable monetary value — a fair market value. For example, a donor contributed $1,000 to a crowdfunding campaign with a tiered rewards system, and contributions of $1,000 or more unlock the highest tier. The campaign stipulates that the highest-tier donors receive a prize. Because the donor received the prize due to their contribution, this is considered a quid pro quo donation. Another common charitable quid pro quo is charity dinners. When deducting quid pro quo contributions, taxpayers must subtract the benefit's fair market value from the initial contribution amount before deducting the donation from their adjusted gross income.
FIND A CHARITY TODAY
If you're passionate about people in your community, consider giving to a local charity. Not just for the tax benefits, but because it's the right thing to do.
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