How to Record Charitable Donations This Tax Season
It?s tax season, and for many people this means identifying their charitable donations from the last year. Charity can be a great way to help out those in need. About 12 million tons of clothing are thrown out every year in the U.S., even though the majority of it could instead be recycled and reused, with the money from the sales benefitting charitable organizations.
Whether you?ve contributed clothing donations or you?ve given donations for military families, you get to write off these contributions when you file your taxes. Sometimes, this can be enough to make you eligible for a lower tax bracket.
No matter what type of organization you?ve donated to, there are guidelines you need to follow in order for them to count as a deduction on your tax return.
How to Correctly Do a Tax Write Off
Any organization you donated to, for example, needs to be a qualified charity. Most religious and governmental organizations are going to be write-off acceptable; the IRS also keeps a list of the majority of eligible organizations.
You can make a donation by check, using your credit card, a payroll deduction or cash; however, you will need proof that you spent it. In most cases this means a receipt from the charity that outlines the fair market value of what you?re donating, a list of the donations, and the date you donated. Although you can sometimes stretch the limit of your assessments, if your estimates are unreasonable (listing used items as having the same value as a new item, for example) the IRS could end up calling you out on it.
Only Use the Gross Proceeds for Cars; Not Market Value
Many people donate their old cars to charity. In this case, you want to make sure that you apply only for the gross proceeds of the sale. If your 2005 car has a Kelly Blue Book value of $2,000 but the charity only receives $1000 for it, you have to take a $1000 deduction.
Charitable donations not only can help out your local community — they can also help you receive more money back on your tax return. Just make sure you follow the rules, and don?t overestimate the value of your donations!