Although your charitable nature surely isn’t solely
motivated by the potential for a tax deduction, saving a few bucks on your
taxes is a nice side benefit. To make
sure you maximize the tax value of any of your planned philanthropy before the
end of the year, consider the following guidelines:
To Whom Can I Make Charitable Donations?
Although Frankie, your buddy from high school, might be down
and out on his luck, neither your decision to buy him lunch nor the $50 you
gave him while no one else was looking will qualify as a tax deduction. That’s
because Frankie isn’t a charity – at least not in the eyes of the Internal
Revenue Service (IRS).
Only donations to qualified charities are potentially
deductible. You can find a list of
qualified charities on the IRS web site here, but note that religious
organizations and government agencies may qualify even if they are not listed.
What Kind of Donations Are Deductible?
To be potentially deductible, you can give a qualified
charitable organization money, whether by cash, check, or credit card
charge. You can also give a charity
physical objects, such as clothes, kitchen items, or old furniture. Just about anything that has legitimate value
is potentially deductible.
Keep in mind that the physical objects must be in at least
“good” condition—no deduction is available for those socks with just a few too
many holes in them. TurboTax Its Deductible
will properly track and value your donated items.
By When Must I make My Donation to Be Able to Potentially
Deduct it in 2013?
Donations made by December 31, 2013 are deductible on your
2013 tax return you will file in 2014.
To be considered “made by December 31,” a cash gift must be received by
the end of the year. A check must be
mailed before the end of the year, even if it is not deposited by the receiving
organization until January.
If you choose to make a gift by credit card, the charge must
occur by December 31. Such a donation will count as a potential 2013 tax
deduction even though you probably won’t actually pay the credit card bill
until early 2014. As to physical items
you donate, each must be received by the qualifying charity prior to year end
to qualify as a potential tax deduction.
What Proof Do I Need of My Charitable Donations?
Ideally, you should receive documentation for every gift you
make. In addition, all cash and physical
gifts above $250 require a receipt to be potentially deductible.
Get Online Free Federal Tax Calculator 2014
Why Do You Keep Saying “Potentially” Deductible Instead of
Just “Deductible?” Are You Mincing Words?
Even if your donation meets all of the requirements
discussed above, your donations still might not lead tax savings. That is because not everyone is eligible to
deduct their qualifying charitable contributions.
Only those who itemize their deductions can benefit from the
charitable contribution deduction, however if you have other itemized
deductions like home mortgage interest you may be able to take itemized
deductions instead of standard deductions just by not forgetting your itemized
deductions.
Regardless, TurboTax will compare the total of your itemized
deductions to the standard deduction and give you the one that gives you the
most tax savings. You don’t need to
worry about how to figure out which deduction gives you the most tax savings.
Charitable giving is an important part of society and
benefits you and the recipient in ways difficult to quantify at the time you
make the actual gift. With the tips
above, hopefully you will now know what charitable donations will help those in
need and give you more money in your pocket.
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