The year is rapidly coming to a close and many individuals and companies are looking for that perfect organization to contribute to this holiday season. Charitable giving is a fulfilling and meaningful experience, and even though individual donations are down 13.7 percent nationally this year (Source: Businessweek), many are continuing to make a conscious effort to give back and better their community or cause they support.
With any year-end giving, there are many things to take into consideration.
For individuals, charitable giving can be a daunting task if you are unaware how to file the information on your federal tax return and may end up losing you money come tax time. The following is a list of basic charitable giving tips to ensure your contributions pay off on your tax return:
a. Donate cash or property – Contributions are not deductible until an actual payment is made.
b. Contribute to a qualified tax-exempt organization – Individuals must contribute to a charity with 501(c) (3) tax-exempt status to receive tax benefits, unless it is an organization that is not required to by the IRS, such as churches and religious organizations.
c. Itemize deductions – Filing your tax deductions only works for people who are eligible to itemize their deductions.
d. Keep records – Be sure to follow the IRS’s requirements when filing for taxes, including saving canceled checks, acknowledgment letters from the charity, and appraisals for donated property.
Regardless of your how much you give or what charity you choose to support, it is important to talk to your financial or tax advisor – before you donate – about the best approach to maximize your tax savings.