People have a range of motivations for giving away money or goods to charity -- promoting a cause, helping people in need, and sometimes simply de-cluttering the closet. No matter your reason for being generous, if you meet the tax deduction requirements, you can reap a benefit of your own when you file your income tax return.
Before you reap any benefits from charitable donations, you must file Form 1040 and report your contributions on Schedule A. However, a little extra paperwork isn't the only change on your taxes. You must also give up your standard deduction. If your charitable contributions, when added together with other itemized deductions like mortgage interest or state and local taxes, don't exceed your standard deduction, you're better off giving up the charity write-off.
Qualified Organizations Only
Even though you might think you're doing a good deed, Uncle Sam only rewards you on your income taxes if you make a donation to a qualified charitable organization. Qualifying organizations include certain nonprofit schools and hospitals, religious institutions and public charities such as Goodwill Industries and CARE. According to IRS Publication 526, most organizations should be able to tell you whether you can deduct your contributions. If not, you can use the Internal Revenue Service's online database to check.
In almost all cases, the IRS requires you to get documentation of your donation before you claim a deduction on your taxes. In most cases, like cash donations and donations of goods worth less than $500 total, you're not required to include the receipt with the tax return, but you'll need the receipt if the IRS questions your deduction. For cash donations under $250, you can use a canceled check or credit card statement as validation. For donations of goods under $250, the IRS waives the requirement if getting a receipt is impractical, such as if you donated canned goods at an unattended drop site. Otherwise, you need a receipt that shows what you gave, who you gave it to, when you gave and what, if anything, you received in return. For example, if you pay $120 for a charity ball and the fair market value of attending the event is $50, you can only deduct $70 on your taxes.
Year to Deduct
You're usually limited to deducting contributions you made during the calendar year on that year's tax return. For example, you could only include contributions made between January 1 and December 31 of 2014 on your 2014 return. Even if you didn't itemize in prior years, you're not allowed to carry forward donations that you could have claimed but didn't. For example, if you gave $1,000 to charity last year, but didn't claim it because you didn't itemize, you can't use that donation on this year's return. The only time you can deduct contributions made in a prior year is if you weren't able to claim the entire deduction in the year you made the contribution because your donation was too large relative to your adjusted gross income.
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