Giving back is the right thing to do. And sure, there's also the benefit of getting a tax deduction. Of course, that’s not why you donate, but when you make a tax deductible donation, your taxable income is lowered, which means you’ll have less tax to pay.
Whether you're thinking of donating cash to the Salvation Army or clothing to a local non-profit, here's what you need to know about charitable tax deductions.
What's Deductible And What's Not?
Tax Deductible Donations
Your donations must go to qualified tax-exempt nonprofit groups that are:
- Have a literary purpose
- Prevent cruelty to children or animals
Not Deductible as Charitable Donations
- Amounts paid to civic leagues, social and sports clubs, labor unions, and chambers of commerce
- Gifts made to most foreign organizations
- Gifts made to groups that are run for personal profit
- Gifts made to groups whose purpose is to lobby for law changes
- Amounts paid in homeowner's association dues
- Gifts made to individuals
- Donations given to political groups or candidates running for public office
- Money paid for a raffle, bingo, or lottery ticket
- Amounts paid for tuition
- The value of blood donated to blood banks
What Is My Donation Worth?
Aside from the warm and fuzzy feeling that comes from making a difference in the lives of others ⎼ what is a charitable donation worth on a tax return? In order to claim a charitable deduction on your return, you must itemize your deductions on Form 1040, Schedule A.
Other key points:
- A contribution to a qualified charity is deductible only in the year it is paid.
- For cash contributions under $250, you need either a receipt or bank record, such as a cancelled check or credit card statement.
- If a contribution is made with a credit card, it is deductible when it is charged, not when you pay the bill.
- The IRS only permits donations of clothing and household items that are in “good condition” or better. Special rules apply to vehicle donations.
- No deduction is allowed for a separate contribution of $250 or more — unless you have written acknowledgment from the charity showing the date and amount of the contribution and verifying that you did not receive any goods or services.
- Make sure you receive and save the proper substantiation for every donation. If you are in the 25% bracket, that $1,000 written acknowledgment could be worth up to $250 in savings.
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