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Top 7 Tips for Donation Tax Deductions

Top 7 Tips for Donation Tax Deductions

If you like to help out those who are less fortunate, you may be able to receive a tax deduction for your gifts. While it’s always best to consult with a tax preparer if you have questions about specific laws regarding taxes and donations, you can learn the top tips about counting your donations on your taxes here in this article. 

You Must Itemize Your Deductions to Get Credit for Your Donations

The majority of individual filers use the standard deduction on their tax returns, which means they cannot include any donations made for the year. However, you should keep track of your expenses throughout the year so you can determine if you qualify for itemized deductions. If so, you can include your charity donations as a deduction.

Not All Charities Qualify for Tax Deductions

Even though most organizations which are considered charities will count for your donation deduction, not all do. It’s important to find out if your gift to a specific organization is tax deductible. Generally, the charity will know and will provide you with a receipt for your taxes. You can also go online to the IRS website and found out the laws regarding qualified charities. You cannot include any donations made to individuals, foreign charities or foreign governments. If you’re in doubt, find a tax preparer and ask them if your donations qualify.

There are Limits for How Much You Can Include in Your Deductions

Most people will never have to worry about donating too much to count in their deductions. If you donate more than 20 percent of your adjusted gross income, do you have to worry about limiting your deductions. If the donation was to a public charity, you can donate no more than 60 percent of your income. For example, if your AGI is $100,000, you would be limited to deductions of $60,000. 

You Can Donate Non-Cash Items and Count Them in Your Deductions

You can count your donations of non-cash items on your taxes. This includes clothing and furniture that you may give to the Salvation Army or another charity. You can only include these items if they are in good condition or working order. 

You need to assign a value to your items, including your clothing. You may need to get an appraisal of the item if it is worth more than $500. Examples include jewelry or a piece of furniture or equipment. You might donate a working lawnmower to a charitable organization which is worth $750. You would need to have a written appraisal of its value to be included with your tax return.

Make Sure All Donations are Documented

You must get a receipt for all donations if you want to include them on your taxes. Many charities provide a receipt for your donations which can be used for verification. If you don’t receive a receipt, you can use a canceled check, bank statement or credit card statement that lists the organization name, amount and date of donation. For items valued at more than $500, a written appraisal must accompany the documented donation.

You Cannot Receive Any Benefits from Your Donation

To include a donation on your tax return, it must not have any value for you. If you received any benefit from the donation, the value of that benefit must be deducted. A prime example of this situation is when you buy a ticket to an event for charity. Perhaps you pay $100 for the ticket, which would be worth $25 for any standard event. You would only count the $75 over the value of the ticket as your donation. 

Understand the Limits on Donated Vehicles

When you donate a vehicle to a charity, you must be careful how you record that donation. If the vehicle is worth more than $500, you can only count the amount of money the organization received from selling the vehicle. If they keep the vehicle for use instead of selling it, you can claim the fair market value. 

These are just a few of the top tips to help you claim your donations on your taxes. For more assistance, you may want to work with an accountant or tax preparer to ensure you get credit for what you donate while following the income tax laws. 

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