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Charity Tax Deduction

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Charity Tax Deduction

Do you know that you can avail tax benefits for the donations you make to a charity? When you donate to any non-profit organization you can claim for deduction in your income tax.

There will be some terms and conditions for such benefits but if the criteria suits your donation you can list the deductions of you tax to avail the benefits.

You may get deductions for any items that you donate to a charity provided that you estimate the value of the items before donating by the authorized people.

Charity Tax Deduction Rules:

There are some terms and conditions that you need to satisfy to avail the tax benefits. These are given below.

  • What you want to donate should actually be donated. An assurance of giving money or property will not be entitled with the tax deduction.
  • The charity to which you want to donate should be registered for such benefits. Some organizations like churches etc. may not have such requirement.
  • Charity donations are a good way to avail tax deductions but, it is possible only for those who can list the deductions.
  • The documents that you need to provide for getting tax deduction should be taken care of. The receipt from the charity for your property or cash donations, value estimation done before donating any property and even cancelled checks also should not be thrown away.

Maintaining the records of donations for Charity Tax Deduction:

You should maintain each and every financial record for identifying the amount of tax that you should pay. So, when you contribute something to a charity and you want it to be reflected in the calculation of your tax, you should be able to provide the proofs of the contribution.

For that you need to take a receipt from the charity furnishing the details of your contribution along with the name of the charity and the date of your donation. Cancelled checks are involved; they also serve as written documents as they contain the name, date and amount. If a donation is made through debit cards or credit cards the bank statements furnishing the details of payment should surely be included.

The charities which receive the donations both in the form of money or some items will generally give a receipt. You have to submit these receipts with the records. Your request for tax deduction may be rejected if you fail to submit such receipts. If you make number of donations each of 250 $ or more, then you need to furnish the details of each donation separately in a single receipt or take separate receipts for each donation. The receipts should give a detailed picture of all your contributions made to the charity.

Non-Cash Contributions:

Non- cash donations require more details to be given to avail tax deduction. You need to estimate the value of the items that you donate to the charity before donating and get the receipt stating that the items are worth that much and keep the records carefully.

You need to furnish IRS form 8283 if the value of the items you donate is more than 500$. If your donation includes a car or any other vehicle worth 500$ or more, you need to take a written acknowledgment which you have to provide for availing tax deduction. If your contribution exceeds 5000$ then a proper estimation of the value of the contribution is to be made and a written document with all the details clearly should be provided.

Charity Tax Deduction Limitations:

There are different types of limitations if you want your tax to be deducted based on the donations you make. These may be specific to some items or may be more general. There may be 50 % Charity Tax Deduction for cash donations, 30 % for property or any other non-cash donations and 20% for donations of capital gain assets. If the donations exceed this limit they can be carried forward to the next financial year. This can be continued for utmost five years.

Here are some of the donations which are not entitled with any form of tax benefits. Donations that you make for Political parties, electioneers, any action committees related to politics, to Individual people, professional associations like job consultancies etc. in the form of fees, Labor unions, business associations, Commercial schools and hospitals, Foreign governments, Local or state governments in the form of fines and to a charity in the form of time spent for services offered . Keep these limitations in mind and get good tax benefits.

For more information you can read Eight Tips for Deducting Charitable Contributions


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