Charitable Work Helps Your Bottom Line
Our sense of charity always seems to heighten whenever we near the holidays. The giving mood starts to emerge around Thanksgiving, when we give thanks for all that we have received during the year, and peaks in mid- to late December. If you plan on giving some of your time or money to some charitable causes this year, you should know that there are financial benefits, in addition to the spiritual and emotional ones.
If you make a charitable donation, it will usually be tax deductible if you itemize your deductions on your tax return. If you take the standard deduction, then you won’t be able to deduct your charitable donations. If you make a clothing donation to your local Goodwill or Salvation Army, be sure to ask for a receipt that itemizes the clothing you’ve donated. The clothes must be in “good” condition or better to be deductible. If you need some help valuing them, here’s a guide on how to value your clothing donation. If you donate more than $500 in clothing, expect to fill out a Form 8283 Non Cash Charitable Contribution come tax time.
In general, you will want to get a receipt for every donation you make because the IRS will want to see proof of your donation if you are audited. Several years ago, you didn’t need a receipt unless the cash donations was over $250. Now, you need a receipt for every cash donation.
Charitable Mileage Deduction
Every mile that you drive in the service of a charitable organization in 2009 can be deducted at 14 cents a mile. The best way to document your charitable mileage is to keep a log. There are a couple of great iPhone Apps that will do the trick, here’s one Intuit just came out with for the iPhone, Tap2Track. Or, if you don’t have an iPhone, a pen and notepad is a good alternative. Whenever you drive your car for charitable work, you’ll need the date, the number of miles (odometer readings will work), and the purpose of your drive. The IRS gives you the option of deducting the actual expense, instead of the standard mileage rate of 14 cents, but it’s up to you to calculate that figure for yourself.
Unfortunately, volunteering in and of itself doesn’t have a direct financial benefit, outside of the mileage deduction, but that doesn’t mean you shouldn’t volunteer! According to a study out of UC San Francisco, Dr. Sei J. Lee learned that seniors who did volunteer work over the past year were more likely to outlive their non-volunteer counterparts. While it’s hard to draw conclusions based on that, it does sound like volunteering helps you live longer. :)
If you need some assistance in deciding who to help, consider the efficiency of the organization. Charity Navigator is a great site that rates charities on their organization efficiency. In just a few seconds, you will find out what percentage of donations go to programs and how much goes to administrative and fundraising expenses. They will also tell you how that charity rates against its peers, which can be important if you want to find out which charity will make your dollar go the farthest.
If you plan on giving this holiday season, do it correctly and you can lower your tax burden while helping those in need!