Hi, I’m Bette Hochberger, CPA, CGMA, and Thanksgiving is tomorrow, so for today’s #businessquickie, we will discuss the ins and outs of tax-deductible charitable donations. Let’s begin!
What qualifies as a tax-deductible charitable donation?
If you want to receive a tax deduction, you must ensure that the organization you donate to is a tax-exempt organization. I recommend discussing which charities you want to give to at a tax planning session with your CPA. You can also prepare by looking at section 501(c)(3) of the Internal Revenue Code. Or, if you already have an organization in mind, use the IRS Tax Exempt Organization Search tool to verify their status. The easiest type of donation is cash, but if you decide to donate physical items worth more than $500, you must include a qualified appraisal with your return. If the donated items are worth less than $500, you must have the receipt showing the date and value of the things. Keeping receipts is the best way to ensure your charitable giving will be tax-deductible!
Once you decide which qualified organization you are giving to, feel free to ask them how much of your donation will be tax-deductible! Then, when you finally donate, ask the organization for a receipt! Staying organized is essential for most tax deductions.
If you volunteer for a qualified organization, you cannot deduct your service, but you can deduct expenses related to the work you contribute. For example, if you drive, you can deduct your mileage! Again, keep your receipts because if you are audited, you might need them.
How much of a deduction can I take?
You can deduct up to 60% of your adjusted gross income (AGI) and 100% for cash donations when giving via charitable donations. Check the IRS website for more details.
Are charitable donations worth it?
Charitable giving is always a worthy cause but when it comes to itemizing your deductions, make sure the sum of your itemized deductions is more than your tax bracket’s standard deduction. You can find your standard deduction amount by going to the IRS website.
If you aren’t itemizing for the 2021 tax year, the CARES Act allows for a $300 “above the line” deduction for charitable gifts made in cash. The CARES Act also has temporarily increased the limits on contributions of food inventory.
If you have any questions, please reach out via social or set up a zoom meeting with me! I hope you learned something and have a fantastic Thanksgiving (if you celebrate it), and we will see you next time!