Deductible Charitable Donations

Many gifts given in December were never on a shopping list. According to a recent NBC story, it is the top month for charitable giving, accounting for 18 percent of annual donations. You may not need a shopping list for these benevolent gifts, but there are things to remember if you hope to receive tax deductions for them.

First of all, you can only claim charitable contributions if you itemize your tax return. Secondly, there is a difference between nonprofits and charities. Donations are only deductible when made to a qualified charity under IRS rules. To see whether your organization qualifies, go to https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-…. Churches, synagogues, temples and mosques are generally eligible to receive deductible donations, even if they’re not on the list. But it’s best to ask if you’re not sure. Contributions to political organizations or candidates are not deductible. If you receive a gift for making a donation, you must deduct its value from the amount you gave.

Of course, there are ways to give beyond writing a check. If they are in good condition, clothing and household goods can be deducted at fair market value. Consult your tax professional regarding special rules for donating appreciated stock, jewelry or artwork. Keep a detailed record of items contributed with dates and descriptions. You now need a receipt or cancelled check for every donation, regardless of the amount. Additional rules apply for contributions of $250 or more.

Donations are deductible in the year in which they are made. So decide when the deduction would be most beneficial. You may want to “bunch” contributions by giving two years’ worth of gifts in one year – provided you don’t go over the ceiling on deductibility for charitable gifts. If you are subject to the Alternative Minimum Tax, charitable donations are still deductible. However, if you aren’t subject to the AMT every year, you may want to make more donations in years with higher tax rates.

For more information on targeting your charitable efforts, give our office a call. We can help you identify causes that align with your values. We can also work with your tax advisor to help you and your causes get the most benefit from your gifts. (We do not provide tax advice; coordinate with your tax advisor regarding your specific situation.)

Written by Securities America for Distribution by Jordan Dechtman.