We all want to make the world a better place by giving what we can when we can. But what you may not know is that your charitable efforts can reduce your tax burden this year.
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You don’t have to be rich to be generous, but when you do give to others, you can simultaneously put a little money back in your own pocket. That’s right, we’re talking about making those donations and charitable gifts count at tax time.
So how do you know what you can deduct and where to put those contributions on your tax return? We’re here to help you Nav.it like a pro. Follow these steps and you’ll ensure that your donations help others—and your bottom line—this year.
How to find out if it counts
Before making a donation that you hope to deduct at tax time, be sure the charitable organization you’re supporting is qualified. Simply ask to see the letter the Internal Revenue Service (IRS) provided the charity. Organizations are accustomed to this request, so many post this letter on their websites, making it easy to find.
Sites like Charity Navigator help you find charities you can trust and support as well as confirm you’ll receive a deduction at tax time. You can also verify an organization’s status by calling the IRS at 1-877-829-5500. Churches, temples, and other religious organizations are typically deemed charitable organizations, but again, if you have any doubt, check it out first.
As generous as you might be to donate to friends with GoFundMe campaigns, these may not be deductible. Only donations made to GoFundMe Certified Charity campaigns (valid for U.S. registered 501(c)(3) charitable organizations only), are guaranteed to be tax-deductible. You should receive tax-deductible receipts automatically from GoFundMe’s charity partner, PayPal Giving Fund.
If you’ve donated goods, you can claim the fair market value at tax time, but if they’re valued at $500 or more, you’ll need to complete and attach Form 8283.
Save those receipts (cash included)
Simply stating that you made a donation isn’t going to cut it with the IRS. You’ll need to back it up with evidence, which typically can be a receipt — for cash or credit — or a canceled check. If you’ve made a donation of $250 or more to a single charity, you’ll also need a letter from that organization with the date and amount of your contribution, which serves as acknowledgment of your donation to that qualified organization. While you won’t need to attach it to your return, you’ll want to have it available should you be audited.
If your employer allows you to direct payroll deductions toward a charity, you’ll need to hold onto your pay stub or W2 as proof of that contribution, as well as a pledge card bearing the name of the charity.
Volunteering time and talent isn’t tax-deductible, however, any expenses incurred while helping out may be. So, keep those receipts for parking, tolls, uniforms, or supplies you needed to get the work done.
Ready, set, claim…
Be sure to keep an eye on the time. If you’re hoping to take off a deduction for 2017, you must make your contribution during that year. Checks written and mailed before year-end count, as do credit card donations — even though you may not actually see any cash leave your account until 2018.
Once you’ve made your donations and have gotten your records and receipts in order, you’re ready to claim your charitable deductions on your tax return. To do so, you must itemize them on Schedule A on your federal form 1040 using lines 16-19.
If you have any questions, don’t hesitate to contact a professional tax preparer. This is definitely a situation where you’d rather be safe than sorry.