Charities and non-profit organizations have become a huge sector. They provide vital services that many count on. In 2011, charities and nonprofits had a funding of 298 billion dollars. Without these, America would not be what it is today. To encourage these operations, the government allows charitable donations to be tax-deductible.
The charity or non-profit needs to be a qualified organization. This includes religious organizations, educational groups, scientific research facilities, environmental organizations, public parks and cities. You will need to file Form 1040 with your itemized deductions in order to claim any charitable donations. Filing taxes can be complicated and it is important that all tax laws are followed. Jay and his team have the experience to help you with everything you need!
Charitable Donations – How Do They Effect Me?
Charitable donations reduce your taxable income and lower your tax bill. It is important to keep written receipts, cancelled check and bank records proving who you donated to. You should also keep the date and how much the donation was for. There is a cap of up to 50% of your adjusted gross income that you may deduct each year. If your donation is non-cash, you will need to fill out Form 8283 listing this information. Donating used goods such as clothing, linens, electronics, appliances and furniture gets you a write-off for the item’s fair current market value. This may be considerably less than what you originally paid. There are many calculators available online to help you determine this value.
When filing your tax returns a check can be deducted the year that you write the check. Credit card donations may be deducted the year the charge is made. A pledge to make a donation is different. It is a promise to make a future donation, but there is no deduction until you actually give the money.
You cannot write off a donation for the full value if you are getting something in return. If you buy a ticket for a charity dinner, you can only right off the money above the cost of the food. For example if you buy a ticket for $60 but the cost of the food was $25 you can write off the $35 which is what is considered the “donation”. For donations of more than $75, the nonprofit must give you a written statement telling you the value of what you received in return. It should break down the deductible portion.
If you are donating a vehicle valued more than $500, your deduction is limited to the amount the car brings in when it is sold at auction. The charity has 30 days after it sells your vehicle to issue you a Form 1098-C that shows the sale price. You must attach that form to your tax return or the IRS will disallow the deduction.
Supporting charities and nonprofit organizations warms the heart and really makes an impact on the success of the charity. Let the tax experts at Numerico make sure that your generous spirit is a win-win!