As we enter the holiday season it’s time to start thinking about how you can minimize your tax liability. A great way to do this is by giving back to charity. Here are six tips that the IRS recommends when it comes to claiming deductions for charitable donations.
Before you give any gift you are going to want to make sure the charity is qualified with the IRS. You can use their Select Check tool to see if the group you want to donate to is qualified or not. If you choose to donate to a church, synagogue, temple, mosque or government agency then they do not need to be in the IRS approved database.
Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity, the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements.
If you have furniture in your house that you no longer want then it might be a good idea to give it to charity. You can also donate items like electronics, appliances, home furnishings and linens. If you want to donate clothes then you need to make sure they are in good used condition to be able to claim a tax deduction. If you are going to be claiming a deduction of $500 or more than you do not need to meet any quality standards you just need to include a qualified appraisal of the item with your tax return.
You must have records
If you are going to be making a donation of $250 or more then you need to get a receipt from the charity acknowledging your gift.
You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2017. This is true even if you don’t pay the credit card bill until 2018. Also, a check will count for 2017 as long as you mail it in 2017.
If you are feeling extra generous this year and you want to donate your car, boat or even an airplane then special rules apply.
Wrapping it up
Making a charitable donation is a great way to decrease the amount of tax that you need to pay each year. Just make sure you follow all of the rules given to you by the IRS.