Give Me a (Tax) Break!
More than 50 percent of American households donate to charitable organizations, according to the National Philantrophic Trust. And while I certainly recommend giving of yourself and your time to your community, it also entitles you to some tax breaks.
Here are four things you need to know in order to maximize those breaks in the name of charity.
1. Correctly identify deductible organizations. Per the IRS, a charitable contribution is “a donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting to get, anything of equal value.” Deductions include: monetary donations given to the all governments (local, federal, and state), nonprofit educational institutions, war veterans’ groups, and other qualified organizations such as the Goodwill, United Way, and the Salvation Army. There are some donations that are not considered deductible, so take note. It may be for a good cause, but you will not be able to receive a tax deduction if you give to the following: labor unions, chambers of commerce, social clubs, sports affiliations, lottery tickets, blood banks, sorority or fraternity groups.
2. Itemize if you want to deduct. You have two options for deducting certain types of expenses from your income. Either file for a standard deduction or itemize your deduction. In order to itemize, you will need to make a list of all qualified expenses and deduct them from your income. Common deductions include charitable contributions and income property expenses.
3. Keep a paper trail. Get a receipt every time you make a contribution. If you make a monetary donation, keep your bank records. If you donate items, get a receipt. For donations more than $5,000, you will need an appraisal. For donations between $500-$4,999, you will need to have supporting evidence of when and how you got the property.
4. Know that your time, while valuable, doesn’t count You can deduct out-of-pocket expenses for bus transportation and car mileage when you’re volunteering. If you drive, you can be reimbursed based on the standard rate of 14 cents per mile. But, you cannot be reimbursed for your time, nor can you deduct the value of your time. Only out-of-pocket expenses can be reimbursed.
About Dr. Karen Ratliff
Credit: Dr. Karen Ratliff
Dr. Ratliff is a certified life coach and professional educator, assisting many people in accomplishing financial, career, and educational goals. She is also the author of “Tightening Your Bootstraps: 104 Tips to Kick Your Debt to the Curb Now.” Keep up with her budgetary advice via Twitter @drkarenratliff her website at www.drkarenratliff.com, and her facebook fanpage “Financially Focused with Dr. Karen Ratliff.”