Holiday Giving: The 411 on Charitable Donations
It’s the time of year for giving, and you’re probably being solicited to make charitable donations to local schools, churches, and the like. While you should certainly donate what you can for those fuzzy holiday feelings, you might want to donate a little extra and get a receipt for those you can deduct. Here’s the 411 on how to maximize your giving, and your refund.
Exemptions and Restrictions
A wide range of charities take tax-deductible donations, many of them listed on irs.gov, but it is important to be aware of which donations are not deductible. Anything paid to: social and sports clubs, civics leagues, chambers of commerce, most foreign organizations, groups that exist for personal profit or lobby to change laws, homeowner’s associations, political groups or candidates for public office, and country clubs. This list is by no means exhaustive, so always check with organization leaders.
Now, some restrictions. If you’re donating household goods and clothing, the items must be in good and wearable condition. Special rules apply to donated vehicles, which we covered here. [link] Most people will not contribute more than 20% of their AGI, but there are limits if you do. No deduction is allowed for a single contribution of $250 or more, unless you have written confirmation from the charity. And finally, always get a receipt for the transaction.
How Much is the Deduction?
Most of us donate to charity by giving household goods and clothes, as well as canned foods and monetary amounts. Typically for goods, you would find their fair market value at the time of donation, or what they would sell for at a secondhand store such as Goodwill, and use that amount when filing. You can research a variety of sources for these numbers, or use one of the many online calculation tools available online. If you contribute capital gain property, the value of the deduction is equal to the property’s fair market value. If you gift items worth more than $500, you must file Form 8382. An example of how much that deduction could be worth: if you donate $1,000 and you are in the 25% tax bracket, you will save $250.
Deductible Volunteer Expenses
Although you can’t deduct the value of your time spent volunteering, you can deduct out of pocket expenses accrued from volunteering. Examples of these expenses are costs associated with entertaining on behalf of a charity, gas costs, the cost of a ticket to a charity event, the cost of a volunteer uniform, as well as travel, lodging, and meals for an away-from-home volunteer trip.
One last note: don’t forget to itemize! You must itemize your deductions on Schedule A in order to deduct charitable donations. Ready to gift your unused items and time and give back to your community? Again, make sure you get your receipts!