Charitable Giving Can Give Rise to a Deduction
We have opportunities to make charitable deductions all year long. If you are one who itemizes your deductions, you may be able to deduct your contributions. But let me say this first. Do not let the tax law interfere with your giving heart. Make the contributions you are guided to make. You can identify which contributions are deductible when you know the rules I am about to share with you.
What makes a contribution deductible?
Your gift must be given to a recognized charitable organization. An individual is not a recognized charity and a gift to an individual is not deductible. Do not let the tax law govern how you live your life. The tax law just governs what you put on your tax return. GIVE as your heart is led to give.
Churches, synagogues, temples, mosques, and other religious organizations; federal, state and local governments (if the contribution is for public purposes only); nonprofit schools, hospitals and volunteer fire companies; public parks and recreation facilities; public charities like Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy/Girl Scouts, Boys/Girls Clubs of America, etc; and war veterans’ groups are just some of the kinds of organizations that qualify for your deductible contribution.
Cash Counts Too!
Your contribution can be cash. You may not receive anything in return or you are not really making a gift. If you give to your public television station during their appeal for funds and you receive any kind of product for your gift, the value of that product is not deductible. The station will give you a receipt for your deduction which is the amount of your payment that is more than the value of that product you received.
For example, when I give $150 to KAET and I get a Suzy Orman DVD and book valued at $50, my deductible contribution is $100. When I give KAET $200 and get nothing in return, I deduct the full $200. I must be able to document this gift. I want to be sure to keep a copy of my cancelled check or my credit card statement showing KAET as the organization who received my payment.
A letter from the charitable organization acknowledging my gift is certainly helpful and is required when your gift is $250 or more on any one day. Protect yourself and keep your documentation with your copy of your tax return. Be sure to watch for my blog about recordkeeping.
Examples of Non Cash Contributions
Your contribution can be non-cash. In my Tax Organizer I send my tax clients every year I call non-cash contributions “stuff.” Stuff is what you have in your closets, your drawers, your garage. You are not using your “stuff” anymore but it is still useful to someone else.
When your “stuff” is in good or better condition, and you give it to a qualified organization like Salvation Army, Goodwill Industries, your church, synagogue, mosque or another similar organization, you can take a deduction for the value of what you give.
How do you determine the value? One guideline is to determine what it would sell for in their thrift store. What would it sell for in a garage sale or a yard sale? The used couch that once cost you $500 or more will not bring that much at the thrift store. For their valuations guidelines go to www.goodwill.org or www.salvationarmyusa.org.
You Must Provide Proof
It is your responsibility to substantiate or prove your deduction. In addition to the name of the receiving organization (the donee), you will need to list the date of your contribution, list the items you gave on that date, the values your assigned to those items and what method you used, and your cost or other basis in the property given. If you are deducting over $500 of non-cash contributions you must also have a written receipt from the donee and you must attach an additional form to your tax return. Take photos of what you are giving to help document your deduction.
Giving a car or boat is another whole discussion for another blog. Giving something that has increased in value, called appreciated property is also another discussion.
More Charitable Contributions
If you use your car for your charity, like the church treasurer making the bank deposits, or the food bank volunteer picking up or delivering food, keep track of those miles driven for charitable purposes. The standard rate for deducting charitable mileage is 14 cents per mile. That rate is set by law and has remained unchanged for many, many years.
Examples of Non Deductible Expenses
Money or property given to civic leagues, social and sports clubs, labor unions and chambers of commerce; foreign organizations (certain Canadian, Mexican and Israeli charities qualify); groups that are run for personal profit; groups whose purpose is to lobby for changes in the law; homeowners’ associations; individuals, and political groups or candidates for public office are not deductible contributions.
Purchasing (the key word here is purchase or buy) raffle, bingo or lottery tickets does not give you a deductible gift. Dues, fees or bills paid to a country club, lodge, fraternal order or similar groups are not deductible. Tuition to either secular or religious schools is also not deductible.
I am a regular blood donor. I know I am helping others. But the only deduction I can claim for that donation is 14 cents per every mile I drive to the blood bank.
The Hidden Benefit of Giving
Our time is our greatest gift, but the value of our time or services is not deductible. Do not let the words “not deductible” keep you from giving your time to anyone or any organization. They need what you can do for them or it wouldn’t touch your heart.
You be the gift that keeps on giving.