Hands holding coins in a jar. Numerico | Charitable Donations Tax

Charitable Donations Tax | Numerico | Certified Public Accountants Livonia, MI

Residents of LivoniaCantonDearbornRoyal Oak, and St. Clair Shores are generous people, quick to open their wallets for a charitable cause. Being generous is good for the spirit but has financial advantages too.

Charitable donations tax deduction is an effective way to reduce your tax liability. The IRS rules governing these deductions, though, are strict. The IRS discounts certain charitable donation tax deduction claims. 

Numerico and their team of professional certified public accountants guide clients through the charitable donations tax regulations so they achieve the maximum benefit.

Qualified Organizations for Charitable Donations Tax Deduction

Deductions are a tricky area on your tax return. The charitable donations tax benefits are subject to extra scrutiny because they’re open to abuse. It’s a difficult area to police because people may claim the donation of property and cash. 

Another area of concern for the IRS is that people use the deduction to skirt regular taxes. One could argue, for example, that donating a house to your homeless child is charitable. In reality, that is a way of avoiding inheritance duties.

To avoid confusion, the IRS is specific about which organizations you may donate. Section 170(c) of the Internal Revenue Code specifies these institutions. Most registered non-profit groups, churches, and community chest organizations qualify. 

Numerico makes the process of selecting the right cause easy. Our CPAs are well versed in the charitable donations of new tax plan regulations and are standing by to guide you.

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Are Charitable Donations Tax Deductible?

As long as the gifts meet the registered guidelines, they should be deductible. These rules can be tricky to navigate, so it’s best to have professional assistance. If the IRS determines that you’ve overclaimed, you’ll pay penalties and may face jail time. 

Numerico will guide you through the claims process to ensure that it goes smoothly. 

The basic rules are:

  • You may not claim more than 20% to 50% of your income, depending on the organization
  • The IRS must recognize the institution as a qualifying non-profit
  • You may only claim if you itemize your expenses
  • Non-cash donations must be claimed at a reasonable market value
  • You may not claim monies if you received a benefit back
  • You’ll need to provide proof of the contribution in the form of a receipt or canceled check
  • For high-value property, you’ll have to provide a qualified appraisal

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How Much Do Charitable Donations Reduce Taxes?

The donation reduces your taxable income for the year. For you to benefit, the total of the gift and your expenses must be more than the standard deductions. Tax laws change from year to year, but individuals generally receive a rebate off their gross income. 

After considering the rebate, you’ll also need to consider the charitable donations tax deduction limit. The primary limitation is in the percentage of your adjusted income that you’re able to donate. The CARES Act has increased the limits for donations in 2020 for specific charities, but it’s typically between 20% and 50%. 

It’s essential to understand which limits apply to which organizations. You may only claim up to 30% of your gross income, for example, to a cemetery fund. Your Numerico CPA will help you navigate this tricky area. 

To further complicate matters, the value of property donations comes into play. The IRS considers amounts at fair market value, not at cost. What matters is what you could reasonably expect to sell the item for, not what you paid for it. 

The value of the item also comes into play. You might have to pay capital gains tax on the increase in value, even though you haven’t received the income. 

Donating property can become a complex issue. Speak to your trusted advisor at Numerico for the best tax advice. With our expertise, we’ll work out the best strategy to legally reduce your tax liability.

Numerico | Charitable Donations Tax Experts Livonia, MI

With all the questions surrounding charitable donations tax, it’s essential to work with a team of professional certified public accounts at Numerico to make sure you have all your options covered. We are here to help from start to finish and the years to come.

Contact us to schedule a consultation, or call us at (313) 278-8030. One of our team members will gladly help you with all your charitable donations tax questions.

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