2015 is nearing an end. While you’re thinking of grabbing gifts for your loved ones, don’t forget that there are charitable things you can be doing that will help reduce your tax bill come tax time.
Monetary Donations to Charity
Most people know that charitable donations are tax deductible. There are a few stipulations when it comes to deducting monetary donations though. First off, the organization must be eligible in the eyes of the IRS. So a cash donation to a family or friend would not qualify. You can check a charity’s eligibility on the IRS website here.
You must also have a bank record or written communication from the charity as proof of the donation. If you have money taken out of your paycheck that went to a charity, you will need your paystub(s), W2, or employer documentation that shows the total amount donated for the year.
Have you donated household items, clothing, equipment, a vehicle, etc. to charity this year? First off, the IRS requires that the items donated are in good condition.
If you donate an item that is over $500, you will need a qualified appraisal of the item with your return.
For any gift over $250 in value, you will need a written acknowledgement from the charity with a description of the item(s).
The deduction for the donation of a vehicle, boat, or airplane depends on whether the organization plans to sell it or use it. If the organization is selling the property, the deduction will be the amount they received on the sale of the item. If the organization plans to use the item, you can deduct the fair market value of the item. Either way, you will need the charity to complete form 1098-C and attach it to your tax return.
Charitable donations are only tax deductible if you itemize and you only want to itemize if the total amount of the deductions exceeds the standard deduction. If you do itemize and take the deduction, your charitable donations for the year cannot exceed 50% of your adjusted gross income.
One more tip: If you plan to itemize, make sure to make your donations before the 31st of December.