With so many people facing difficult times right now due to the high cost of living and recent natural disasters such as hurricanes and wildfires, there are so many ways to help those in need. Whether you already gave to charity or you are considering giving, you may have questions about what charitable donations are tax deductible.
What is a Tax-Deductible Charitable Contribution?
If you volunteer and give cash or non-cash items to a 501(c)(3) organization, your donation may be a tax-deductible charitable contribution. Before you donate, be sure to confirm that the organization you’re donating to is a registered 501(c)(3) organization. You can check to see if the organization you are going to make a donation to is a 501(c)(3) organization at the IRS website. In short, you must give to a registered non-profit organization (not individual) that operates as a true charity in order to take a tax deduction for the donation.
Who Can Deduct a Charitable Donation?
If you donate cash and non-cash items to a 501(c)(3) organization and you can itemize your deductions, then you can deduct the fair market value of your donations. Typically, people who own a home and have mortgage interest can itemize their deductions. Even if your itemized deductions are close to the standard deduction ($13,850 single and $27,700 married filing jointly), donating may push you over the standard deduction allowing you to deduct more and save money on your taxes.
Donating Cash vs. Donating Stuff
When you write a check, charge a donation, or simply provide cash to a charity, the amount of your potential deduction is easy to determine; it’s simply the amount you contributed. Sometimes, however, you might donate household items, such as old clothing or furniture. In that case, things are not so straightforward. Instead of being able to deduct what you paid for the items donated, you are limited to the amount that the items are worth.
A reasonable estimate, usually based on what you could get for your items at a thrift shop, is sufficient. No matter whether you donate cash or goods, be sure to get a receipt. If you donate something worth more than $250, a receipt is required.
Don’t worry about figuring out the accurate value of your donations. TurboTax ItsDeductible will help you accurately value and track your donations year-round, and then you can automatically import your donations into your tax return at tax time.
Did the Charity Give You Anything?
If you receive something in exchange for your donation, like a nice meal or a gift card, you can only deduct your contribution to the extent it exceeds the value of what you received. So if you make a $150 donation to a charity, which then provides you a meal valued at $50, your tax deduction is $100.
Fortunately, most charitable organizations provide you with a summary of the tax-deductible amount of your contribution when they send you a letter thanking you for your generosity.
Timing Your Donations
Whether you volunteer your time, give cash, non-cash goods, or give money by charging on a credit card, you can deduct your contribution in the year you make the donation and when the donation is delivered to the organization. Some methods used to donate are pretty cut and dry with regard to when the donation is considered deductible, but there may be a few methods used, like via check, text message, or charge card, where you may be wondering, “when is my donation considered made and tax deductible?”
- Donations via check: The donation is considered delivered the date you mailed the check.
- Contributions via text message: Deductible in the year you send the text message if the contribution is charged to your telephone or wireless account.
- Credit card: Contributions charged on your bank credit card are deductible in the year you make the charge.
Don’t forget you can even make a donation on the last day of the year and receive tax savings while helping someone in need. A donation made in late December means tax savings on a return due less than four months later. A donation made the following January can’t be claimed until the following year.
While potential tax savings shouldn’t impact your charitable giving, it makes sense to be mindful of the opportunities provided by appropriate charitable tax planning. After all, the more you save when you donate, the more you can afford to donate again. Now is the perfect time to show your generosity and give to your favorite charity.
Make Sure You Donate to Legitimate Charities
In the wake of recent natural disasters and the holiday season kicking off, the IRS and Security Summit partners warn of fraudsters setting up fake charities. When donating, always make sure you are donating to a legitimate 501(c)(3) charitable organization. You can check charitable organizations using the IRS Tax Exempt Organization tool.
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