Giving money to a favorite charity feels good and makes the world a better place for everyone. But it can also serve as a valuable income tax deduction! As the end of the year approaches, now is the time to assess your charitable donations, get your records in order for tax time in the spring, and make last-minute donations in order to increase the size of your deduction.
Investigate before giving. Before writing any checks, check to make sure a charity isn't a scam. Even if the charity is legitimate, you should check to be sure their priorities are in line with yours. For example, you might want to give money to an autism charity, but do you want to fund scientific research or help families who have autistic children? Research your chosen charity to make sure your money goes toward goals you truly value.
While you're researching...make sure you can actually deduct that donation. Some organizations are granted a “tax exempt” status, but this simply means that they don't have to pay taxes on the money they collect. This status does not mean you can claim your donations as a tax deduction! You should specifically be told that donations are “tax deductible”, or else you might not be able to claim them.
Gather your receipts. If you have kept receipts for all charitable donations throughout the year, start gathering them now. Taking this step will prevent hang-ups in the spring when you file your taxes. If you didn't collect receipts for your donations, check your debit and credit card statements. You can also use these as proof of your giving, although it will take some time to comb through them and find each item. Highlight them now so that you won't have to search at tax time.
Research your deduction limits. The IRS intentionally sets these limits high, to encourage more charitable giving. Most people never hit their limit. But just for your information, you can give up to 20 percent of your gross income to private charities, and up to 50 percent to public ones.
Make it easier on yourself next year. At the beginning of the year, set a budget for your charitable donations (perhaps based on your income and the deduction that you need to claim). If you establish a payment system using a single credit or debit card, you won't have to worry about collecting receipts anymore. If you still need to collect receipts, set aside a folder in your filing system so that gathering records will be easier in the future.
If you need help creating a financial system that works for you, call our office and we will be happy to help you.
15174 - 2015/12/10
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