The National Philanthropic Trust reports that taxpayers claim an average of $2,520 in charitable contributions on their tax returns — and almost one-third of donations are made during the month of December, according to the nonprofit Charity Navigator. It’s not just the year-end holidays that inspire generosity; it might also be that donations made to charities by Dec. 31 can be deducted on your taxes.
There are a few other things you should know — before writing a check to your favorite charities — that can help maximize your tax-deductible donations.
1. Check to make sure a donation is tax-deductible
There is a difference between a good deed and a charitable donation. Ornaments and wrapping paper purchased through a school fundraiser are not tax-deductible, even if the funds are for new band uniforms. The IRS only allows you to deduct contributions made to qualified nonprofit organizations. To determine if a donation is tax-deductible, use the IRS Exempt Organizations Select Check tool.
2. Not all filers can deduct donations
To deduct charitable contributions on your taxes, you’ll need to itemize your deductions (using Form 1040, Schedule A). The IRS doesn’t allow taxpayers who do not itemize their deductions to claim donations on their taxes.
The IRS created an online tool, Can I Deduct My Charitable Contributions? that includes a series of questions concerning income, filing status and amount of donations to help you determine whether you can claim donations on your tax returns.
3. You need proof of the donation
The IRS requires taxpayers to have proof of their charitable contributions in order to claim tax deductions. The most you can donate to a charity without a receipt is $250. While it’s nice to have a receipt from the nonprofit with its name, date and amount of the contribution, the IRS will also accept canceled checks, bank records and credit card statements as proof of cash donations less than $250. To receive a deduction for a donation of more than $250, the IRS requires written documentation from the charity — so be sure to ask for a receipt.
4. Remember noncash gifts
You’re allowed to deduct noncash charitable contributions such as cars, boats, clothing and household items. Again, this deduction is limited to taxpayers filing itemized returns.
For contributions over $500, the IRS requires Form 8283 to be attached to your tax return. Special rules apply to noncash contributions valued over $5,000, including a qualified appraisal (and the appraiser must fill out Section B of Form 8283).
5. Watch for red flags
Scams pop up during the holidays to take advantage of your giving spirit and quest for last-minute tax deductions. The Federal Trade Commission maintains a list of charity scams on its website to help alert consumers.
Avoid writing checks to charities before first checking them out, and don’t succumb to pressure to make a donation on the spot. Not only may your funds be misused, contributions to fake charities are not tax-deductible.
The holidays are a great time to spread cheer with charitable donations. Make the most of your charitable intentions with these simple tips, and enjoy the holiday season with confidence that you have made a difference!