Writing off Charitable Donations for Tax Benefits

Writing off Charitable Donations for Tax Benefits

Perhaps it is only a trick of the imagination, but every year it feels as if my home becomes unbearably cluttered after the holidays. Between the growing mountain of decorations and unused items in storage, it is easy to see the need for the annual spring cleaning. However, you may want to ask yourself if your unwanted junk has any further value before hauling it away. If you have ever thought about donating your things for a tax break, here’s what you need to know about writing off charitable donations.

Charitable Donations to Qualified Organizations

The Internal Revenue Service has strict criteria for writing off charitable donations. Before dropping off your items, make sure that the organization is eligible. According to the government website, the organization must operate for charitable, scientific, educational, literary or religious purposes.  This definition also includes foundations dedicated to the prevention of cruelty towards children and animals as well as some sports competitions.

Listed below are some common recipients for charitable donations.

  • Religious organizations like churches, synagogues, mosques, and temples
  • Charitable organizations like the Salvation Army, Goodwill, and the American Red Cross
  • Nonprofit organizations like hospitals, schools, and volunteer fire departments
  • Veteran’s’ groups
  • Cultural organizations
  • Public parks and recreation projects

Itemize your Tax Return

The only way to receive a tax break for your charitable donations is to itemize your deductible expenses on Schedule A. Your annual deductions must exceed the standard deduction limit for 2019 to qualify. Last year this amount was $12,200 for singles and $24,400 for married couples. The instructions for Schedule A for claiming gifts to charity can help guide you through your next tax return.

Currently, you are allowed to deduct up to 50% of your adjusted gross income. Keep in mind that certain organizations may affect this limit. Itemizations can become cumbersome and confusing, so it’s best to consult the government website if you have specific questions about your contributions.

Keep Receipts for Writing off Charitable Donations

Just like any other claimed deductions, you will need receipts for writing off charitable donations. This is especially important for gifts greater than $250 which require written acknowledgment. Receipts also provide proof if the IRS takes a particular interest in your tax return. A little forethought and immaculate record keeping can save you a headache down the line.

Most charitable organizations ask if you would like a receipt when you drop off donations. The receipt should include the name of the organization, a description, and an estimated amount of donated items. The Goodwill even provides a valuation guide online to help you calculate the total value of your donation.

For larger donations, you should request a statement from the charitable organization. It should include a description, estimated amount, and whether you received any goods or services from the donation. The last point is of note since you can only deduct the contribution, less the value you received. For example, if you donate $500 to a local arts program and you receive concert tickets valued at $100, you must deduct the ticket value from your donation.

Donating your unwanted items and charitable contributions is a great way to give back to the less fortunate and claim tax benefits. Before you make a drop off in the donation bin, ask your financial advisor about writing off your charitable donations for tax benefits on this year’s return.

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Write-Offs For Small Businesses That Are Often Missed

Write-offs for your small business

Write-offs for your small business

Write-offs are often hiding right under our noses.

If you’re a small business owner that has yet to file your 2015 taxes, you’re probably jumping for joy over the news that taxes are now due April 18 instead of April 15. And, if you do have yet to file, this also buys you a little more time to review and evaluate your expenses and potential deductions with your accountant.

As you finish the filing process, be sure to keep these write-offs for small businesses that are often missed in mind:

  1. Your startup costs. As surprising as it may be, if you are in your first year of business, costs accrued to start up your business count as capital expenses and can be deducted up to $5,000. If fees go beyond this limit, you can opt to write-off certain initial investments over a period of 15 years. Also, if your attempt to start your business is sadly unsuccessful, you can still deduct the costs as a capital loss.
  2. Health insurance premiums. While this expense would not be considered a business write-off, you can deduct this as a personal expense on a 1040 form if you are self-employed. Deductible premiums includes ones paid for yourself and your immediate family.
  3. Home office. You may already be aware of this one, but small businesses tend to forget about this or often surprisingly steer clear of trying to include this in their write-offs due to worry of an audit to the business owner. If the space is used strictly for business, though, and nothing else, such as entertainment for guests or other family members, this is a business deduction from your taxes. Your home office doesn’t need its own room to count; it can still be a part of another room in the home. To determine the amount that is deductible in a shared space, you would measure the work space and divide by the square footage of the room. Read more about the home business tax filing and deduction process here.
  4. Bank fees. Charges from your bank for ATM withdrawals, account fees and the like are completely deductible. Make sure to keep this in mind when filing and reporting your expenses throughout the year.
  5. Office supplies. Keep a steady record of the receipts and purchases of your office supplies used for your small business. These will help to provide a tax break for you.
  6. Furniture and other equipment. Office furniture or furniture and equipment used for your company can be deducted in full the same year of purchase or depreciate, which is taking a portion over a period of time. For furniture, you would deduct through the course of seven years. For other equipment, such as computers and printers, you would depreciate for five years.
  7. Driving your car. If your vehicle is a staple for your organization, the IRS permits you to write-off some of the costs. Even if you only periodically use your car for meeting with clients or other business-related exchanges in between your personal errands, you can still receive a tax break for related costs. Just be sure to maintain strong documentation on mileage, gas, parking and toll fees and even the justification for drive. We recommend immediately writing this information down per trip with the date included to avoid having to go back and remember these tedious details.
  8. Credit card interest. If you were paying for business items with your credit card, you can deduct the interest paid on the card on your taxes.

Some other expenses that can be write-offs for your small business include but are not limited to: education costs, subscriptions to industry publications or memberships related to increasing knowledge in your trade, travel charges, and even some entertainment expenses. You can read more about those tax breaks in this helpful guide.

Make sure to always inquire about what can be included as a deduction for your small business so that you can use more funds to do those bigger things we know you are all meant to do.