charitable_donationEvery year, consumers are likely on the lookout for many different ways in which they can reduce their ongoing tax liabilities, and one of the best they can usually find is by making sure to take advantage of the charitable donation deductions made available by the Internal Revenue Service. However, it's also important to note that there are many rules and restrictions related to these gifts, so they have to be dealt with carefully on a tax filing.

Perhaps the most important of the tax rules laid out for charitable donations is the types of organizations which qualify as such. For instance, donations can be made to a state or the District of Columbia, a U.S. possession, or the federal government itself in many cases, as well as many things (such as trusts or funds) set up by those entities. However, some of the more common places where people donate include religious organizations, war veterans' groups, nonprofits, fraternal organizations, and more.

Obviously, all contributions must be made during the tax year, in the form of cash or property. In the case of the latter, the value of the deduction is qualified as the "fair market value" for it. However, there are also limits on the ways in which some contributions can be deducted. For instance, these write-offs cannot exceed more than 50 percent of adjusted gross income in most cases, but it's a 30 percent limit when donations are made to private foundations, or all others that do not qualify for the 50 percent mark.

How can these be proven?

When trying to make such deductions, particularly if they're sizable, the IRS will typically want consumers to provide proof of the transaction, and this can be a relatively easy thing to do; all that's usually required is a receipt from the organization to which the donation was made, proving that they received the gift in the amount, or at the value, claimed on the American's tax forms.

However, this can often be difficult water for average consumers to navigate safely, and for this reason it might be wise to visit their local tax office and speak with an experienced tax preparer about what they might need to do to properly qualify, as well as keep their annual tax costs as limited as possible. The more that can be done in this regard, particularly over the course of the year rather than just in a short period ahead of the filing deadline.

Disclaimer: Tax Lounge is an informational source for industry news and related topics. We take every effort to provide honest and accurate tax information, but this information should not be a substitute for professional tax advice. Use our office locator to find your local tax office or click here to subscribe to our free newsletter.