Chances are you’ve seen the #GivingTuesday hashtag on social media lately. Donating goods or money to the charity of your choice is not only an opportunity to help those in need, but also a chance to lower your overall tax liability in the long run. As the year winds down, here are a few tips to keep in mind.
- You’ll need to attach Schedule A, Itemized Deductions to your 1040 tax form if you plan on itemizing your charitable contributions or donations. If you decide to itemize your deductions this year, you cannot use the standard deduction.
- If you will be making a donation by cash, PayPal, or check, you will need to keep a record of your donations. Charities will typically provide a receipt either at the time of donation or at the end of the year. If you haven’t received a donation receipt yet, contact the charity so they can provide one for you. Religious institutions such as churches or temples will issue a statement at the end of the year. Keep these records in a safe place so you can refer to them when filing your tax return. If you donate via payroll deduction, keep copies of your paystubs showing the payroll deduction.
- For donations made by text, keep a copy of your cell phone bill showing the donation.
- If you are donating property such as clothing, housewares or toys, ask the charity for a receipt. You’ll need to declare the fair market value of the items when you deduct the donation from your taxes.
- If you volunteer for an organization, keep track of your mileage and uniform costs, if any. Keep any related receipts.
- Any items such as clothing, housewares and toys must be in good condition in order for you to deduct their fair market value.
- A charity must meet IRS guidelines in order for you to deduct your contributions of time, goods, or money.
While charitable contributions were around long before the #GivingTuesday hashtag, it’s a good time of year to think about donating time, money, or goods to a worthy organization. By doing so, you’ll be helping those in need of your time, goods, or monetary donation.
Keep in mind you will need to track donations over $250.00, and keep any receipts to verify the donation amount, especially if you made a monetary donation. If this is your first tax year for itemizing your deductions, it’s a good idea to check in with a tax pro who can answer your specific questions regarding charitable contributions.