It feels good to give to the less fortunate, especially at this time of year. But, it also feels good to earn a valuable deduction on your income taxes. You can accomplish both of these goals at the same time, by claiming your charitable contributions as a deduction on your federal income tax return in the spring. But, as with any other deduction provision, you must carefully follow guidelines set by the IRS. So, if you consider gifting a charity, make sure to follow these rules.
Research your chosen charity. In order for your deduction to count, the charity of your choice must be qualified by the IRS. Fake charities do exist, and are especially prevalent during the holiday season. They might even appear quite official. So, use this search tool, provided by the IRS, to ensure that you are gifting to a qualified charity and you will be able to use the gift as a tax deduction.
Keep appropriate proof. Without proof of your charitable donations, you can’t claim the deduction. And, if you try to claim it anyway, you will lose the deduction (and probably owe the IRS money) in the event your return is ever audited. Credit card or bank statements will suffice, or ask for a written receipt for gifts of cash and household goods.
Value household goods correctly. It’s a common misconception that you can claim the original purchase price of household goods when donating them to charity. Actually, you can only claim their fair market value (for example, the amount for which you or the charity could sell the item). Of course, in some cases people do donate antiques or other items that have appreciated in value. In this case it would be wise to keep a copy of an appraisal, or some other proof of the item’s worth. Remember, too, to keep your documentation secure. Aside from paper copies, it might help to snap pictures of receipts and upload them into your cloud system.
Make donations by December 31. This is the deadline for counting them toward your 2017 tax deductions.
Work with a skilled tax professional. As with any tax matter, experienced advice can spare you headaches in the future. Work with a tax pro to claim deductions correctly, and help prevent problems with your return.Read More