Giving donations to charity from time to time could provide you with some tax benefits. American taxpayers can use various tools to determine if their charitable donation could be deducted on their tax return, which makes the process a little easier. Still, there are some things tax payers should know about charity deductions, so we have created a brief overview below of things to consider when deducting a charitable donation.
The Qualified Charity
To deduct a charitable donation, the taxpayer must ensure the charity is qualified. A qualified charity means that the charitable organization has obtained a special status from the government, so taxpayers can give a donation to this charity and deduct it on their tax return.
There are many ways to find out if a charity is qualified. Most charities will mention this on their website, but sometimes it is best not to just take their word for it. Before you donate, simply check the status of a charity on the IRS website.
The Itemizing Process
Taxpayers who want to deduct their charitable donations must use the itemizing process, which are present on Tax Form 1040. To get some benefit from your donations, fill in this form and return it to the IRS with your federal tax return.
Benefits Could Mean Less Deduction
Some taxpayers get rewards for charitable donations they make; this could be a meal at a restaurant or tickets to a special event. When you receive a reward from a charity as a thank you for your donation, it could affect your deduction.
To ensure you have entered the right deduction for the charitable donation, you must make sure that you only claim the amount that exceeds the market value of the benefit you’ve received; for example, the amount that exceeds the cost of the meal you had at the restaurant. When in doubt about the market value, please contact the charity in question or the IRS for more information.
Donation Types
Even though most American taxpayers give cash to charity, other donations are also possible. If someone gifts a property to a charity, they can deduct the market value of the property in question. The same applies to other non-cash donations given to charities including clothing and household items.
There are some exceptions to the rule though, because special regulations apply to the donation of cars, boats and other unique property donations. Therefore, if a taxpayer donates any of these special items, they must check with the IRS for the proper deduction regulations.
Donations Over $250
American taxpayers who donated more than $250 to charity will need written proof of that donation before they can deduct it on their tax return. This written proof must be provided by the charity and must clearly display the donation amount or a description of the property in question. The document must also declare if the taxpayer has received any benefits in return for his or her donation.
Conclusion
Charitable deductions may seem somewhat complicated at first, but once you familiarize yourself with the rules and regulations, you can add your deductions quite easily. Of course, there is also help available for anyone who needs assistance with their tax return deductions.