Giving to charity and helping others in need can sure produce a mighty good feeling.
Yet, there is another reason it pays to give to charity — tax deduction.
Donations to charity are tax-deductible expenses. These donations can decrease taxable income and lower a contributor’s tax bill. Write-offs can only be claimed for contributions to charitable organizations that are qualified for tax-deductible donations. Before you donate, ask the recipient if it qualifies under Internal Revenue Service (IRS) rules. Some organizations are not required to obtain 501(c)(3) status from the IRS; these include churches and other religious organizations.
Charitable donations can include money, volunteered services, sponsorship of local charity events, or donating inventory or services. Donations must meet certain criteria in order to be tax-deductible. Monetary donations include those made in cash or by electronic funds transfer and payroll deduction. Cash contributions of $250 or more require a written acknowledgement from the charity. Written acknowledgements must be in hand by the time you file your tax return.
A pledge or promise to donate is not deductible until you actually pay.
To receive a tax deduction, contributors need proper documentation when filing income tax returns. Each situation is unique and will affect how much the donor can deduct, or whether a donation is deductible at all.
Individuals and businesses making contributions to charity should keep in mind any new rules adopted in recent years.
It is critical for donors to keep documents when it comes to preparing taxes to ensure they can back up any deduction claims. The IRS offers information on the records needed for monetary, non-monetary, and out-of-pocket cash expenses when donating services. Donors should check the IRS website for tips on contributing to charity before filing.
Author: Darice Britt