For those able to give, charitable donations have a value in and of themselves. Knowing a difference can be made is very rewarding. But, if that gift can be structured in a manner that allows the donor to receive tax benefits, that is all the better. Here are some basic considerations for making sure your charitable donation can be used as a tax deduction.
Charities must be recognized by the IRS as tax exempt
Some nonprofits do not qualify for tax exempt status. You’re on safe ground if you are donating to a well-known organization like the Red Cross, but if you have any doubt, the IRS has a tax exempt organization search feature on its website.
Keep accurate records
Certain minimal donations do not require documentation, but it is recommended you keep accurate records, especially with cash. Also, there may be supplemental forms required for certain types of contributions. As with everything tax related, the ability to verify, if necessary, the claimed deduction is paramount.
Deductions must be itemized to claim a charitable donation
Itemized deductions include such categories as property tax, sales tax, and medical expenses in addition to charitable donations. Tax laws often change; consequently, whether your itemized deductions exceed the current standard deduction is an issue to be determined. Additionally, itemized deductions may be limited to a certain percentage of your adjusted gross income. The goal is to reduce your taxable income to the lowest amount possible under the tax code.
Consult with your tax professional and financial planner
Your tax pro can stay abreast of all the latest tax law changes and keep you on the right side of the IRS. Good financial planning provides the larger picture of how your investing goals can be fulfilled within the framework of the standards by which you live your life.
Investing with Spinnaker is very much a personal experience. We take the time to sit down with you and listen to your needs and work diligently to get you where you want to go.
Disclaimer No Rendering of Advice. The information contained within this website is provided for informational purposes only and is not intended to and must not be taken as a substitute for obtaining accounting, tax, legal, or other professional advice from a tax resolution professional (e.g., an Enrolled Agent, CPA, attorney, etc.).