Every year around this time, we start thinking about what we plan to do in terms of charitable contributions. For most, there are a few organizations we like to support with cash, and a few we like to support with time.
Regardless of how you decide to give, it’s important to keep your taxes in mind so you can save as much as possible when you go to file your return. If the government is willing to give you a tax break as you’re helping others, it makes sense to take advantage of it, right? Here are a few ways to help make sure you’re getting all of the deductions you deserve this year.
Save Your Receipts
If you make a donation and want a tax deduction, you are required to retain a record of that donation. It’s important to realize that acceptable records are those that are “official.” This means a bank record (such as a canceled check or the charity’s name for a debit or credit donation on the bank statement), or a receipt from the charity itself. Bottom line: if you want the tax deduction from your donation, you need an actual receipt or bank record.
You can also donate goods around the holidays. Donations to thrift stores and to charities that qualify as tax-exempt can be a great source of tax deductions. If you have your kids donate some of their toys just before the holidays (and the advent of new toys), you can deduct the fair market value on your taxes.
Be aware that for donations over a certain amount, you might need to attach extra paperwork, including sharing the amount you originally paid for the items. When donating to charitable organizations, you can deduct a gift of $250 or more, only if you have a statement from the charitable organization showing the amount of money contributed, and whether the organization did or did not give you any goods or services in return for your contribution.
Understand that you don’t receive a tax deduction for the amount you paid for goods; you only receive a deduction for the current market value, as long as the items are in good, usable condition. TurboTax ItsDeductible will calculate the fair market value of your donations.
When you donate the goods, don’t forget to ask for a receipt. Even when donating goods, you need a receipt from the charitable organization.
Track Your Mileage
If you volunteer your services for a charity this holiday season, you might be able to track the mileage driven in your efforts to help. You can’t receive a deduction for the value of the time you spend working for the charity, but you can get a deduction for the miles you drive. If you are driving your car in an effort to benefit a charity, make sure that you keep track of the mileage, and then deduct it later. This can be one way to reduce your tax liability while doing good works.
Holiday donations can be a great way to help those in need this time of year and you can also get a tax benefit. You might as well get a financial benefit, even as you help others.
Finally, it’s important to note that you can only claim charitable contributions if you claim itemized deductions. If you usually get the standard tax deduction, you may be able to increase your tax deductions by donating so you can itemize and get the larger tax deduction. However, you don’t need to know the difference between standard tax deductions and itemized tax deductions, TurboTax will ask you simple questions about you and give you the tax deductions and credits you deserve based on your answers.