Giving Tuesday was developed as a strategy to checkmate the excessive spending and shopping of other holidays like Cyber Monday and Black Friday. The goal is to reduce excessive consumption that characterized the Christmas holiday and the end of the year.
The IRS, in a bid to encourage this, promises that Giving Tuesday donation could qualify one for some tax deductions on filing the next year's tax return. You, however, need to follow some rules and codes that guide charitable giving.
Here are vital things you need to consider before donating for the next Giving Tuesday or any other Holiday
In other words, some organizations have been approved by the IRS for tax exemption. You will find details of these organizations on the IRS database. Also, temples, mosques, synagogues, and some government agencies qualify to get donations even if they are not included in the database.
Proofs like a bank transaction or any document that carries the date and time of the transaction, as well as the amount of transaction, is helpful. A written statement from the charity organization as well will suffice. It does not have to be cash as donations could be via credit card, electronic wire transfer, and checks.
If you are using a payroll deduction, we encourage you to retain a pay stub, a Form W-2 wage statement, or anything that proves the amount transferred to charity.
If you want to give household items, clothes, shoes, and the likes, the market value of the item is what you will claim on schedule. You must know the fair market value to do this. For clothing and other household items to be tax-deductible, they must be in good condition.
Household items like shoes and clothing that is worth over $500 will not necessarily meet this standard. This is valid only if the taxpayer includes the worth of the item on the cash returns. In addition, a gift worth $250 and above must be accompanied by a written acknowledgment letter from the charity. The acknowledgment letter should specify the items donated.
There are special rules that guide the donation of cars, boats, and some particular types of properties.
For IRA owners above 70 1/2, they are qualified to donate as much as $100,000 per year to a qualified charitable organization tax-free. This donation will be classified as their required minimum distribution.
The IRA trustee must make the transfer of the funds to the qualified charity. While older donors will not get a tax deduction, they will qualify for RMD law. This way, they will not pay tax on it.
While giving your time at charitable organizations is encouraged as well, it does not qualify you for a tax deduction. The hours that you dedicate to work at the charity cannot help you claim a tax deduction.
The bright side, however, is that you might be qualified for tax deductions on some of the costs that you incur while volunteering. For instance, if you spent on stationery, paid for gas, and it was not reimbursed, this could make an exemption.
Also, you can count your mileage if you drove during your volunteer work at the charity. You are qualified to claim 14 cents per mile for all driving to help the charity.
The contributions you make are deductible in the year made. With this, do not get carried away with the holidays that you won't be able to donate. For your gift to count for the very tax year in which it was charged, the donation must be made before the year runs out. It does not matter if you pay your credit card the following year.
This timing rule also binds check that you wrote in a year and cleared the following year.
For your donation to be valid, you must produce essential documents. However, the type of tax records you need is a function of the kind of contribution and the amount. If you donate large properties and other properties, for instance, you need an additional reporting form.
The good news is that these rules apply to all the charitable gifts you donate all year round, and not Giving Tuesday Holiday alone.
