Hey everyone! I’m Cindy, the Tax Manager here at Bette Hochberger, CPA, CGMA. For today’s Tax Tip Tuesday, I will explain how charitable donations can impact your taxes and guide you through the process of claiming deductions, including essential documentation requirements.

We understand the importance of maximizing tax deductions while supporting causes close to your heart. Charitable contributions not only make a positive impact on society but can also provide significant tax benefits!

 Understanding Charitable Deductions

When you make donations to qualifying charitable organizations, you may be eligible to claim deductions on your federal income tax return. These deductions can reduce your taxable income, potentially leading to lower tax liabilities.

Eligible Charitable Organizations

To claim deductions, ensure your donations go to eligible charitable organizations recognized by the IRS. Most nonprofit organizations, religious institutions, educational institutions, and certain government entities qualify as eligible recipients.

 Cash and Non-Cash Donations

Both cash and non-cash contributions can be deductible. Cash donations include money, checks, or electronic fund transfers. Non-cash contributions may include clothing, household items, securities, or even real estate. Keep in mind that the valuation of non-cash items follows specific IRS guidelines.

Itemizing vs. Standard Deduction

To claim charitable deductions, you must itemize deductions on Schedule A of your federal tax return. Compare your itemized deductions to the standard deduction to see which method provides greater tax benefits. For some taxpayers, taking the standard deduction might be more advantageous.

Documenting Your Donations

Proper documentation is crucial when claiming charitable deductions. For cash contributions under $250, retain a bank record, receipt, or written communication from the charity that includes the organization’s name, donation date, and amount. For cash donations of $250 or more, you must obtain a written acknowledgment from the charity.

Valuing Non-Cash Contributions

When donating non-cash items, determine their fair market value at the time of the donation. For smaller items, use thrift store or resale prices as a guide. For more valuable items, such as artwork or real estate, consider obtaining a professional appraisal.

Special Rules for Non-Cash Donations

Non-cash donations exceeding $500 require filing Form 8283 with your tax return. Donations exceeding $5,000 (except publicly traded securities) may necessitate a qualified appraisal and additional documentation.

Carryover Deductions

If your total deductions exceed your taxable income, you can carry over the excess deduction for up to five subsequent years.

Supporting Charitable Deductions

Maintain organized records of your donations, including receipts, acknowledgments, and appraisals. Consider using online tools or apps to track and categorize your contributions efficiently.

Seek Professional Advice

Navigating the complexities of charitable deductions can be daunting. I recommend consulting with a tax professional who can ensure compliance and help you optimize your deductions.

Charitable donations not only make a positive impact on society but can also provide valuable tax benefits. By understanding the rules and documentation requirements, you can make the most of your charitable contributions while minimizing your tax liabilities!

I hope you all enjoyed today’s blog, and I’m excited to make more! I’ll see you next time.