Tax Deductions For Donating To Charity

The tax code in the United States has a great number of provisions to promote certain behavior. One area of behavior is the promotion of giving to qualified charities.

Giving To Charities - Tax Deductions and Such 

In the rush for preparing and filing tax returns, a lot of people absentmindedly forget to include deductions for contributions to charities.  If you itemize deductions on your tax return, this can be an expensive omission. 

Pursuant to relevant provisions of the tax code, you can claim significant deductions for donations which may include donating money or goods to a qualified charity.  Qualified charities are those charity organizations that are registered with the IRS as a 501c3 entity.  The 501 designation is known as the relevant section of the tax code. 

It is very important to know that not all charitable organizations are qualified with the IRS.  You could go to the IRS website and look through a list of charitable organizations to see if a particular group is included.  If they are not, red flags should go be raised. 

Before you claim deductions for donations which you were involved, there are some things to take into account: 

1.   Politics - You might feel strongly about certain political ideologies, issues or candidates.  You could contribute to the causes, but you cannot deduct the contributions as charitable giving. 

2.   You can only deduct contributions actually made for the year in question.  So write it somewhere, have some type of reminder or make sure you will remember when you made the contributions.  For example, if you forgot to claim donations on your tax return for the 2011 year, you will not be able to claim them on a 2012 return.  Instead, you should go back and amend the 2011 return. 

3.   If you make a contribution to a good or service, you can only deduct the amount you contribute that is in excess of the fair market value of the good or service.  For example, many charitable groups will hold auctions to raise money.  Let’s say if your winning bid for a one week hotel stay is $400, then you can claim a deduction for the bid amount minus the normal cost.  You can't just write off $400. 

4.   In most cases, donations of stock or property should assign the fair market value, not an arbitrary amount based on your opinion.  Big ticket items has to be supported with an appraisal. 

5.   The rules for donating cars have changed.  The charitable group should have sent you correspondence about the amount it was able to sell the automobile for.  This is the amount you will be able to deduct, not the blue book amount allowed in the past.  If the charity has not sent you anything, contact them to get written verification.  They should know this is required to be done under new IRS rules. 

Donating to charities is a positive moral step.  Make sure to claim your deductions to reap savings on your taxes.