It’s almost time to bust out the wrapping paper and tinsel!
Yes, it’s that time of year again. It’s the season of giving. Before you get wrapped up in holiday parties and stocking stuffers, you’ll want to make sure that you’re mind isn’t blurred with visions of sugarplums and too much eggnog.
January marks the start of tax season and we want to make sure that you’re ready. That includes reporting those holiday gifts to charity as tax deductions.
How do I donate?
We tend to think that the only way we can help out in society is by breaking out our checkbooks and tacking on as many zeros as our bank accounts will allow. Money is great. But it’s not the only way. It’s also probably the main reason why the majority of us end up doing nothing. We simply can’t afford to.
Seeing as our daily lives revolve around checking up on ourselves (our bank accounts, our smartphone notifications, our Tinder profiles), it’s easy to forget that taking the time out for others is also considered a charitable donation.
If you can write out a check, then all the more power to you! If you can’t, don’t downgrade the time you can spend helping out at your local soup kitchen or cleaning out your closet to donate those jeans and blazers you never ended up wearing. Your nearest Goodwill or Salvation Army will take them off your hands.
Where should I donate?
The dilemma for some of us is that we don’t know where our hard earned dollars are going when we donate to a charity. We understand! Who wants to spend time researching a reputable charity to support and then not be certain that they are using your money the right way?
Here are a few tools to look into for peace-of-mind’s sake:
- BBB Wise Giving Alliance Accredited Charities : If you mess with the BBB, chances are slim that you’ll be forgiven…even if they are in the holiday spirit.
- Charity Navigator : If this is your first time donating, this is a great site to start with. You can choose what type of charity you would like to donate to, generate a list of charities that fit your preferences and then even donate right from the site!
- Foodpantries.org or Volunteermatch.org : These will help you choose the best place to volunteer. When you donate your time, it’s easy to see just how much you are helping out.
Save your receipts!
Whether you are donating thousands of dollars or just $1, you must have documentation if you plan on reporting that amount as a tax deduction. Documentation is accredited for tax purposes by the IRS if all of the following are shown:
- the name of the receiving organization
- the date of the contribution
- the amount given
How do I report gifts to charity on my tax return?
The first thing to consider is whether or not you will be itemizing your deductions. If you’ll be claiming the standard deduction instead, then reporting a charitable donation will do you no good; tax-wise anyways.
If you are itemizing your deductions then claiming your donations to charity will need to be done based on the type of donation it is. Let’s take a look:
- Donating money. This comes as no surprise to most of us. It’s the easiest way to make a difference (if you have the funds to do it). This method allows you to deduct the amount donated on a Schedule A. If you were given merchandise, tickets, etc… in exchange for your donation, you can only deduct the difference of the two amounts.
- Noncash Charitable Contributions. If the contribution is less than $500, you can report the donation on your tax return with appropriate documentation. If the contribution exceeds $500, you must report the donation on IRS Form 8283 and have the appropriate documentation available for the IRS if needed.
- Charitable Mileage. You can deduct the costs of any driving you did in service to charity if you’re using your own vehicle. You can either deduct the actual costs for driving (oil and gas prices) or use the standard mileage rate. Multiply that rate by the amount of miles driven. With both methods, you can include the costs of tolls and parking in the deduction amount.
The year is coming to an end. That doesn’t mean you should disregard those donations to charity you make in December. Even if they are gifts, you can still report them as tax deductions on your return this year. Start the new year off right! Let our tax pros here at Rapidtax help you deduct those donations and get your tax return filed on time this coming year!