You need proof of your charitable gifts — and a little planning — to claim them as deductions on your tax returns, according to Bob Meighan, vice president of customer advocacy for online tax preparer TurboTax.
Here’s how to make the most of your generosity:
- Check nonprofit status. If you want a deduction for the donation, make sure the recipient is a valid charitable organization. The burden of proof is on you for this. A valid charity has 501(c)(3) status from the IRS. Not every organization qualifies, although they might lead you to believe they do.
- Itemize. Charitable giving contributes to your total itemized deductions, which means you’ll need to itemize to claim full value. Generally, you should itemize if your total deductions exceed the standard deduction — $6,300 for single taxpayers and $12,600 for married taxpayers filing jointly. Other itemized deductions can include medical expenses, taxes and interest.
- Count noncash donations. To maximize benefit, make sure you’re properly valuing noncash donations such as clothing, furniture, toys and electronics. The most important step is putting a fair price tag on each item so you get an accurate deduction.
- Get help estimating the value. According to Meighan, most people underestimate the value of their donated items. He recommends using free online tools and apps such as TurboTax’s ItsDeductible™ to help determine fair market value. ItsDeductible offers thousands of valuations for everything from men’s jeans to Xbox video game consoles, listing the value of those products according to the condition they’re in.
- Remember exceptions. If you donate a car or a boat, the rules are different. The value changes depending on, among other things, whether the vehicle will be used or sold by the charity, and it’s up to the donor to find out.
- Consider a Qualified Charitable Distribution (QCD). For those who may not need income from their IRAs, and are charitably inclined, a QCD may be an option. A QCD is generally a nontaxable distribution made directly from your IRA (other than an SEP or SIMPLE IRA) up to a maximum of $100,000, to an organization eligible to receive tax deductible contributions. You must be at least 70 and 1/2 years old when the distribution was made. The QCD is not tax deductible, but can count against your Required Minimum Distribution (RMD), and may reduce your taxable income. For more information search within IRS Publication 590-B for “Qualified charitable contribution”.
- Keep detailed records. Taking advantage of deductions means good record keeping in the event that the IRS challenges you on it. For example, when you drop your items off, ask for a dated receipt and save it. Use your smartphone to take a picture of your donation. See IRS Publication 526, Charitable Contributions, for more details, including record keeping requirements which vary depending upon the amount of your contributions and whether the contributions are cash or noncash contributions, or out-of-pocket expenses when donating your services.
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The contents of this document are not intended to be, and are not, legal or tax advice. The applicable tax law is complex, the penalties for non-compliance are severe, and the applicable tax law of your state may differ from federal tax law. Therefore, you should consult your tax and legal advisers regarding your specific situation.
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