Charitable giving is woven into the fabric of American culture. Many people generously give to a variety of charities and philanthropic organizations. If you plan to donate to a charity and would like to take advantage of available tax benefits, you need to determine the organization’s tax status.
Qualifications for organizations and incentives for donors
Many organizations qualify under the IRS tax rules, but donations to political organizations and individuals are not tax deductible. You can ask a representative of the charity or organization to determine if your donation is eligible for tax deductions or check the IRS website for qualifying organizations.
In addition, some charities offer gifts in exchange for donations. If you donate to a charity that offers a gift or incentive, it must not exceed the value of the donation. You can also deduct the value of the gift from the claimed value of your donation.
Guidance for charitable giving
The tips below offer pertinent advice for documenting donations, claiming expenses and realizing tax benefits.
- Ask for a receipt: If you donate cash to a charity or philanthropic organization, you need to obtain a receipt, bank record or payroll deduction for filing your taxes. While it’s wise to get a receipt for any donation, you must receive documentation for cash or monetary donations of $250 or more.
- Deduct your expenses for volunteering: In many instances, you can deduct out-of-pocket expenses from taxes for volunteering. This includes gas mileage, parking fees and clothes.
- Donate appreciated assets: You get several benefits from donating stocks, bonds and other appreciated assets. You can deduct the fair market value of the asset from taxes. And you avoid paying capital gains tax on the donation.
According to GivingUSA.org, Americans donated more than $400 billion in 2017. Benefactors have received fulfillment and satisfaction of helping people in need while also enjoying the tax benefits.