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by on October 17, 2022  in Tax /
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Giving to charity feels good and there’s even a financial benefit as you can deduct any charitable donations from your taxable income. However, there are many rules that govern those donations.

Cash gifts are handled differently than non-cash gifts, and different rules apply depending on the amount of the donation.

Tax laws can be complicated, but you can easily find out the details for everything through online research or from your local tax professional.

Check out these 8 tips to ensure you’re getting the most out of your charitable donations:

First: Ensure the charitable organization qualifies before claiming a tax deduction.
There’s a process an organization goes through to acquire the proper status with the IRS. Any organization you contribute financially can provide information about their status regarding tax deductions.

Second: If you’re donating anything other than cash, the value is claimed at the fair-market value.
The values would be similar to what you would pay if you bought something at a thrift store or yard sale. Look at the prices on Craigslist. Those are typically fair-market values. There are also special rules when you’re donating a vehicle.

Third: Maintain accurate records.
A receipt is an excellent way to keep track of your donations. In lieu of a receipt, banking records are also sufficient. However, it’s best to have both a receipt and a banking record.

Fourth: Reduce your deduction by any value that you receive.
If you’re getting any benefit from your donation, like tickets to sporting events,
you’re required to subtract that amount from your donation when claiming a deduction on your taxes. For example, if you donate $500, but benefit by receiving “free” carpet cleaning worth $200, your tax deduction would be $300.

Fifth: Contributions above certain amounts have different rules.
A single donation of $250 or more has certain reporting rules. Another set of rules, primarily an appraisal by an expert, comes into play when the amount is $5,000 or more. If you’re making non-cash donations that total $500 or more, there are other rules.

Sixth: Consider giving assets that have appreciated in value.
Gifts of stock, for example, that have appreciated in value have an added benefit. You get to deduct the full value, and you’re not taxed on the capital gains, since you didn’t benefit from it. The extra money comes off your taxes and goes directly to the charity.

Seventh: You can deduct your costs for helping the charity.
You can deduct mileage and any other out-of-pocket expenses related to any direct service you provide to a charity. This can include parking, tolls, travel expenses, lodging, and food. But proceed with caution if you’re claiming these types of deductions. The IRS tends to scrutinize anyone who takes advantage of this opportunity. Honesty is the best policy!

Eighth: There are limits
You can certainly give away every last cent to the charitable organization of your choice. However, your charitable tax deductions are limited based on your adjusted gross income. But, you might be able to carry over excessive contributions to the following tax year.

There are many great causes that could use your support, and it feels wonderful to be able to help them!

It’s even better when you can reduce your tax burden in the process!

But remember to check the IRS website or consult with a tax professional for current rules and limitations as they may be different than earlier years.  

If you would like additional information, or have questions about this subject, attend our weekly WealthCare Q&A sessions.

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