At this time of year, we’re all in a more generous mood. Charities know this, and often increase their efforts to ask for donations. Giving will make you feel good, but there’s another important reason you should consider donating gifts to charity: It can make for a valuable income tax deduction!
Of course, it’s not as simple as it sounds. In order to qualify for the charitable gifts deduction, you must follow IRS guidelines carefully. Remember these five steps to ensure that your gifts can be claimed on your tax return in the spring.
Choose the right charities. Gifts to individuals, campaigns, or political organizations cannot be counted as charitable tax deductions. Make sure the organizations you consider are on the IRS list of qualified charities. Keep in mind that con artists might try to trick you into believing they work for certain organizations. Do your homework before writing any checks.
Learn how to value your donations. Cash gifts are counted at face value, unless you receive a gift or prize in return for your donation. For example, if you spend 5,000 dollars to win cruise tickets at a charity auction, you must deduct the actual value of the tickets when you claim your deduction amount.
When donating household goods or clothing, you can only claim their actual fair market value – the value for which you could realistically sell them. You cannot claim the price you paid for them when they were new.
If you donate items worth more than 5,000 dollars, you must get a written appraisal to prove your claim.
Keep records. Ask organizations for a receipt showing their name, the date of your donation, and the amount of your gift. Or, you can use debit or credit card statements as proof when you donate that way. Keep copies of all receipts or bank statements with your tax return, in case of an audit.
Donate before the end of the year. In order to claim a charitable gifts deduction on your 2015 tax return, you must make your donations by December 31.
Streamline the process next year. In January, set a budget for the year’s charitable gifts, and sign up for automatic payroll drafts. You can use payroll stubs as your receipts next year. Or, set up a monthly payment system via a single credit or debit card to streamline your record-keeping process.
For more information on charitable contributions, or any other retirement income questions you have, call our office at (760) 436-1711. We will be happy to assist you.
15157 – 2015/12/10