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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