Posted on August 21, 2022.
It’s nice to be able to give back to your community or to those less fortunate. The federal government has been kind enough to permit you to reduce your taxable income by an amount equivalent to your charitable donations, to a point. There are a few rules that must be followed in order for a contribution to qualify for a tax deduction.
Get the most out of your charitable contributions with these strategies:
✓ The organization must have an IRS designation as a charitable organization. A contribution to an individual isn’t deductible. Political contributions aren’t deductible, either. Most organizations eagerly advertise their charitable status. Just ask.
✓ Any compensation you receive for your donation must be taken into account. For example, if you donated $1,000 and received a free dinner in return, your deduction would be reduced by the fair value of the dinner.
✓ Keep records. You can be required to show a receipt, cancelled check, or bank record to support your claim. A letter from the organization can also suffice. Ask for a receipt.
✓ Your time is not deductible. Even if you’re a brain surgeon and you volunteer your time to a charity, you cannot take a deduction.
✓ Property can only be deducted at the market rate. If you donate a car to a charity, the current value of the car is deductible, not the original price. The same goes for real estate, stock, or any other personal property.
✓ You must file an itemized tax return to claim deductions for charitable donations. Use Schedule A to make your claims.
✓ Know the limits. You can’t contribute and deduct an unlimited amount. You can only reduce your gross adjusted income by a certain percentage. For most public charities, the limit is 50%. It’s 30% for many private foundations.
Original Article: Charitable Deductions Can Save On Your Taxes