As Americans, we are some of the most generous people on earth. We give millions, if not billions, to our churches each year. And when a tragedy occurs overseas, we will pour out even more money to help the victims get back on their feet. In addition, our congress allocates billions more each year to maintain goodwill with other nations.
As part of preparing your tax return for the year, you can deduct some of your contributions to charity. Let’s take a look at some of the items you can deduct for your generosity during the year.
In general, you can make contributions to the following types of qualifying organizations:
- Organizations that are set up exclusively for charitable, religious, scientific, educational, scientific, or literary purposes.
- Organizations that have a mission to prevent cruelty to animals and children.
- Organizations that put together amateur sports competition, either here or abroad, as long as they do not provide the facilities or equipment.
Donations to these types of organizations are tax deductible, but make sure you check with them before making a contribution to see if they can receive tax deductible contributions. The IRS has a website set up where you can check to see if they are a qualifying organization.
So what if the organization is not based in the United States? Can you get a tax break for donating to them? With the exception of certain Canadian and Mexican charities, you cannot get a deduction for these types of organizations. However, you can donate to organizations within the United States who distribute the funds gathered to foreign charities, as long as the domestic organization controls to whom the funds are distributed.
Did you donate some type of art or collectible to charity. You want to do a couple of things if you do this. First, get a letter from the organization stating that it intends to use the item donated in its main activity or tax exempt purpose. If you don’t get this letter, and the organization sells the property, your donation will be limited to your basis in the property when you donate it. Otherwise, you can deduct the fair market value of the item donated.
You probably know you can donate cash to these organizations. And you know that you can donate property that is in good condition for the fair market value of the item at the time of the contribution. But did you know that you can also deduct the transportation expenses you incur when doing charitable work? The transportation costs have to be directly related to the charity work. You can deduct the cost of parking, tolls, fees, bus fare, and either the actual cost of gas and oil or the mileage times the current charitable mileage rate put out by the IRS (for 2013, it was $0.24 per mile).
If you volunteer your time with an organization, you cannot deduct the value of your time or the services provided. Additionally, if you hire a babysitter to watch your children while you do volunteer work, you cannot deduct what you paid the babysitter. However, if you had to purchase a special uniform that cannot be used outside of where you are volunteering; you can deduct the cost of this uniform.
Just in case you go hog wild and donate most of your possessions to charity, you will have to keep in mind that your deductions are limited. You can only deduct up to 50% of your adjusted gross income for what you donate in cash, as well as 30% of your adjusted gross income for donations of property. However, you are able to carryover for five years any contributions above this limit.
Now that you know what you can donate, you need to be sure that you keep good records of what you have donated. This means that you keep a listing of any items donated, the date they were donated, and the name of the organization to which the donations were made. Additionally, get a receipt from the organization acknowledging the donation. A list of the cash contributions made, along with the date and organization to which the payment was made will make completing your tax forms much easier.
What experiences have you had with deducting charitable contributions on your tax return? I’d love to hear about it. Also, if you have any questions, shoot them to me at email@example.com, and I would be happy to answer them. If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.