Post-Sandy: Deducting Charitable Contributions
[image error]Many Americans are generously donating to charities and non-profits following Hurricane Sandy, offering money, supplies, food and assistance. Just Friday the Red Cross received more than $20 million in contributions towards relief efforts.
As the year winds down, we’ll hopefully look back and see that we were a very charitable nation, much like in 2011 when individuals, companies and foundations donated close to $300 billion.
And in addition to being altruistic, annual charitable contributions carry financial benefits to givers, namely in the form of tax benefits. Here’s how to maximize your giving by taking advantage of federal tax deductions. Remember the deadline for eligible contributions in the 2012 tax year is December 31.
Big Givers: Itemize Deductions
Most Americans give around $2,500 annually and should file using the IRS’ standard deduction, which allows individuals to claim a maximum $5,700 – double that for married couples. Itemizing your charitable giving, however, is a better option if you contribute more. Itemize your giving using the “Schedule A” form when your file your taxes. With it, you can deduct a maximum of 50% of your adjusted gross income and anything you give in excess can be rolled over for up to five years.
Make Sure It’s a 501(c)
Where you give matters. The IRS’ guide to charitable contributions states, “If your goal is a legitimate tax deduction, then you must be giving to a qualified organization…you cannot deduct contributions made to specific individuals, political organizations and candidates.” Qualified organization must be registered with the IRS as a 501(c). Such organization include religious groups, nonprofits, veterans’ associations and not-for-profit schools. Check GuideStar, Charity Navigator and the IRS’ database to find if a charity you have in mind is eligible.
Cash Isn’t the Only Way to Help
Cash contributions are incredibly helpful in funding the work of charities, especially in disasters where the need is immediate and massive. It’s the most popular method of giving but there are, of course, other ways you can assist. Clothing and household items in good condition are also deductible. For your donation of a sweater, for example, the deduction will be based on its current market value. When dropping off boxes of items to GoodWill or the Salvation Army don’t forget to receive a signed itemized list from the agency.
In September, Farnoosh also reported “unexpected tax breaks” that included; childcare, transportation and other expenses associated with charity work. Not yet sure if you can deduct a contribution? Luckily, Kiplinger has compiled this index for reference.
Track Your Giving
Finally, it’s essential when filing that you keep a paper trail of your contributions. For a cash donation of $250 or more, request a receipt from the recipient. If the contribution was less, document it with any bank or credit card statement where it appears. Also, track non-cash donations up to $500 on an itemized list reflecting the value, description, date and recipient of the donation, among other identifiers. If the value a single non-cash contribution is more than $500, you also must complete and attach the IRS’ Form 8283. To help, tax preparers TurboTax and TaxCut have tools to determine the value of non-cash donation and TurboTax’s ItsDeductible tool actually uses Ebay.com to appraise items.
Photo Courtesy, dangaken.
