‘Tis the season for giving, and your inbox and mailbox are likely chockful of holiday spirit and donation requests from nonprofits. Charities depend heavily on year-end contributions, with over 30% of total yearly giving taking place in December alone. Whether your donations benefit local charities working with at-risk youth or global funds fighting infectious disease, being smart about your contributions can benefit not only your favorite charity, but also your wallet.
Read on for our three ways to be wise when donating to charity.
- Make sure your organization is recognized by the IRS
If you want to claim a deduction on your tax form, you must donate to a qualified 501(c)(3) exempt organization, as defined by the IRS. A quick search of the IRS website makes it easy to determine if your favorite non-profit qualifies. Keep in mind that most religious institutions like churches, synagogues and mosques are automatically considered charitable organizations. To browse for a worthy cause, or to see reviews of a charity you’re interested in supporting, check out organizations like Charity Navigator, the nation’s largest charity evaluator.
- Keep the appropriate documentation for your tax returns
If you’re hoping to receive deductions for giving back this season, be sure to itemize each gift on your federal 1040 form; and be ready to give evidence of any donation by saving receipts or a thank-you letter from the organizations you give to, especially if you’re donating cash! For donations made through payroll deductions, you’ll also want to save your pay stubs or corresponding W2.
Considering a major donation like real estate or stock? Consult your tax advisor for help structuring the gift so that it provides maximum benefit to both yourself and the charity you’re supporting. You can find more information about donating property here, at the IRS website.
- Know what is considered a gift, and what isn’t
Don’t forget that purchases like gala tickets are considered tax deductible, but only after you’ve subtracted fair market value from the amount you paid. Simply put, if you paid $250 to attend a nonprofit awards dinner and the cost of the dinner was valued at $75, you may deduct $175 as a contribution. Be sure to receive the appropriate receipt and contact the organization if you have questions on what portion is considered a donation.
What is your favorite charity to support? We want to hear from you in our comments section below!
Carlyle Financial supports the Children’s Hospital of Los Angeles, to see the results from our last toy drive, check us out on Facebook!