Hudson Valley Tax Prep: How to Claim Deductions for Year-End Charitable Donations
There is no better time to give than the holidays. And there is no better feeling than giving a charitable gift to those in need. Let’s be honest, many of us have been blessed with a lot of material things over the years. A quick rummage through our closets and garages and we’ll find countless things that we’ve just been waiting to part ways with.
To make it even easier to give this year, the Hudson Valley tax experts want to show how you can easily claim your charitable giving as a deduction on this year’s taxes. We’ll cover the different items you can claim as a charitable deduction, and we’ll also go over the most important factors to consider when giving to charitable organizations.
First things first, the deadline for claiming a deduction for this years’ taxes is December 31st, so keep this in mind. Another important point to remember is that you must itemize in order to claim a charitable deduction (On Federal Form 1040, you’ll report all itemized deductions on Schedule A).
What is a charitable donation and what qualifies as a tax deductible donation?
A charitable donation is “A gift made by an individual or an organization to a charity or private foundation” (Investopedia).
This “gift made by an individual” can be any of the following:
- Food – to local food pantries and/or shelters
- Household goods – pots, pans, furniture, knick-knacks, garden gnomes, etc.
- Clothing and accessories – prom dresses, t-shirts, scarves, Aunt Bessie’s overalls, etc.
- Vehicles old and new – the amount you can claim depends on several factors*
- Lots of Money – Ok it doesn’t have to be “lots,” as anything and everything helps. But if you make a monetary donation of any amount, you can claim it as a deduction if you hold onto your receipts.
If you want to claim any of the above as a tax deduction, your donation must be in “good condition or better” to qualify. This term might sound arbitrary, so just keep the recipient of your donation in mind – nobody wants that Swiss-cheese, raggedy old tank-top of yours.
At this point, once you can honestly say that your donation is in good condition or better, you’ll want to establish what we call a “fair market value” for each of your items. Don’t overthink this, just understand that you cannot claim the full retail price for those boots that you’ve worn for the past 15 years. You must first figure what similar boots in the same shape might go for on the open market. Here is a very helpful resource with ranges on “fair market price” for various items.
Alright, so you’ve decided on the goods that you want to donate. You have determined that they are in good condition or better. You’ve established a fair market value for each of the items. Now comes the best part – giving it all away to those who really need it. It’s that simple, right?
Yes and no. If you want to claim a deduction, you must be sure you donate to an organization that is set-up to receive tax deductible charitable contributions. This step is just as easy as the other steps, and more often than not you can simply ask those at the organization whether or not they qualify. But if you want to be sure, you can reference IRS Publication 78, The Cumulative List of Organizations. (Important note: Churches, temples, mosques and other religious organizations are sometimes not listed on Publication 78, but they do in fact qualify to receive tax deductible charitable contributions).
Now you can freely and gladly give all that you have to give, knowing that your giving will be a huge blessing to others.
Be sure to keep any and all receipts that the organization gives to you. In the unlikely case that you’ll need to prove your gift, you will be in great shape to do so.
Important Points to Remember
- Deadline for giving if you wish to claim a deduction is December 31st
- You must itemize on form 1040 if you wish to claim charitable contributions
- Keep all receipts and records on file
- Quickly establish fair market value on donations that are in good condition or better
- Double check that the organizing to which you are giving is qualified to receive tax deductible contributions
- You cannot claim a deduction for volunteer hours worked, but you can claim any tangible expenses associated with volunteer work (i.e. Gas money, highway tolls, required equipment, etc.)
- You can claim a deduction on vehicles, which can get tricky. I will elaborate on this in an upcoming post
- Donations over $250 will require further documentation. Donations over $500 will require additional tax forms. And donations in excess of $5,000 will require an appraisal to determine fair market value
Perhaps the most important thing to remember is this: Claiming a tax deduction when you donate to charity is great, but it’s only a bonus. Giving to charity is a very personal and highly fulfilling thing that we do because we wish to help others and make a difference in our communities. We should all consider charitable giving this year, whether we decide to claim tax deductions or not.
With that said, at this point, you should be a pro at charitable giving. If you’re still unsure or have any questions about the process, please get a hold of me today. I really am a pro when it comes to accurately claiming tax deductions. Also, if you have any quick comments or questions, go ahead and ask in the comment section below.