What’s your favorite cause? In 2012, CNN reported that Americans gave an estimated $316.2 billion to charity. Along with enabling your favorite organizations to continue their good works, charitable giving can also be a smart tax strategy. Donations to qualified organizations can usually be claimed as deductions on your taxes, and you’ll get the added emotional satisfaction that comes from knowing you’ve done a good deed.
Here are some things to keep in mind as you make your donation:
- You must itemize your deductions on your tax return.
- Keep careful and accurate records of the contributions you make. Get receipts for donations of $250 or higher to a single charity. All cash donations (regardless of the amount) will need to have documentation.
- You can deduct tangible property, provided that it is in “good used condition or better”. You will need to substantiate the “fair market value” of whatever you donate.
- Remember that there are some limitations. According to about.com, you can deduct cash contributions in full up to 50% of your adjusted gross income. Property contributions can be deducted in full up to 30% of your adjusted gross income.
- There are certain types of contributions that cannot be deducted, such as: political contributions, contributions to individuals, fees or dues paid to professional associations, contributions to labor unions or business associations, contributions to for-profit schools. You are also not able to deduct the value of your time if you volunteer for a non-profit.
The IRS’s Publication 526 provides more in-depth information on charitable contributions. If you have questions about whether or not a contribution is deductible, be sure to consult a tax professional.