This is the time of year that a lot of US taxpayers like to give something back. Whether it’s through donations of money, property or time, the giving spirit is often the greatest during the holiday season. If you plan to give this season and want to make it count next April when it’s the government’s hand that’s out make sure that you pay attention to the rules.
It is important to know if your donations are tax deductible. Only certain organizations qualify. They include charitable organizations, Federal, state, and local governments and groups organized for specific non-profit purposes such as religion, science, and education. Groups and organizations that are qualified for tax deductions know that they are so your best bet is to check with them. But your whole donation may not be deductible. For instance, if your donation is made in exchange for goods or services like tickets to a dinner the fair market value of what you received must be subtracted from your total deduction.
Donations that exceed $250 can only be deducted with the proper paperwork. Again, the organization to which you are donating should know all about this so check with them for the right documents. This goes for both money and property donations. In the case of property the fair market value is what can be deducted, not the newly purchased price. If the value of the property exceeds $5000 an appraisal must be done. You can find the necessary IRS forms at IRS.gov.
Gifts that are definitely not on the deductible list include those made to individuals, candidates, or political organizations. Gifts made to qualified organizations are also disqualified if you expect an equal monetary benefit in return.
Donated time isn’t quite so cut and dried. The time itself does not qualify for a deduction but any expenses that you incur while donating time to a qualified organization is deductible. This includes travel expenses such as lodging, meals, and specific transportation cost like tickets or auto expenses if the donated time requires it. However, serving one meal in a soup-kitchen during a ten day vacation doesn’t count. The primary purpose of the trip must be to benefit the qualified organization; not your personal recreation.
And, if it turns out that you are an especially giving sort and your deductions wind up amounting to 20% or more of your adjusted gross income there may be additional expenses.
‘Tis the season for giving and if the spirit of charity infects you go with it. But if you want it to count when that other season of giving – giving to the government – comes around in April, make sure that you pay attention to and follow the IRS’s guidelines. For more information about qualified donation visit IRS.gov