Tips For Charitable Holiday Giving
With the holiday season upon us, we know that it is always better to give than to receive. But there are some of those among us who will use people's charitable spirit and turn it against them, while others who intend good, will not always have the best ideas in mind for your contributions.
So in the interest in protecting those feeling charitable, we thought we would come up with some quick ideas so you can protect yourself, your contribution, and yes, even your tax deduction during this holiday season.
- Any organization that is a chamber of commerce, labor union or trade association;
- For-profit schools or hospitals;
- Donations to online fundraising sites, such as GoFundMe or GiveForward. These are generally considered personal gifts to an individual rather than to a registered 501(c)(3) nonprofit organization, but a tax-deductible receipt will be provided for a few exceptions, such as giving to a certified charity;
- Nonprofit lottery, bingo or raffle tickets you purchase; and
- organizations that concentrate on political activities, whether they be lobbying or legislative activities.
Look at charity review services and research online. You will want to make sure the charity is registered and legitimate. The most popular services to help with that are Charity Navigator, GuideStar and the Better Business Bureau's Wise Giving Alliance. Many charities have similar sounding names and some use donations more wisely than others.
Time spent volunteering. Keep accurate records. All cash contributions must have documentation – even for a $1 donation – in order for it to be deductible, and no receipt means no deduction. You can use the actual cancelled check (for donations less than $250), a bank statement or a credit card statement. Save receipts for donations made while checking out in stores. Cashiers usually print the cause and amount of your donation on the receipt.
Acquire all receipts and letters before filing a tax return. Receipts and letters issued by a charity are required for donations exceeding $250 and must be in your possession before you file a tax return. The letter must state the organization’s name, date of donation and amount of the donation. It must also declare whether or not any goods or services were provided in exchange for the gift. Without the proper documentation, you will not receive a deduction on your taxes.
Understand the fair market value. If you receive something in return for a donation, you can only deduct the amount that is above the fair market value (FMV) of the merchandise, goods or services that were provided. Most legitimate organizations will provide the amount in the letter for you. However, this does not include free, unordered items from a charity or token gifts that bear the charity’s name (considered insubstantial gifts).
Non-cash donations also require an acknowledgement. Typically, you have to determine the item’s FMV. Substantiation of the goods donated could include the following:
- List of the goods donated and their condition (must be in “good” condition or better);
- FMV (usually thrift shop value) of the used items. Valuation guides can be found online. If filling out Form 8283, you will need the original purchase price and/or original date of purchase and how it was acquired;
- Any item worth more than $5,000 must be appraised professionally in order to make a claim. You will want to keep a copy of the appraisal;If you donate a car, truck, boat or airplane worth more than $500, you will need a written acknowledgment and 1098–C from the organization before you can take a deduction;
- If your non-cash donations are valued at $500 or more, a Form 8283 Non-Cash Charitable Contributions must be filled out and attached to your tax return;
- Travel to and from donation locations – as well as miles driven while doing volunteer work – are deductible at 14 cents per mile; and
- For a donation of publicly-traded securities, the high-/low-average market price on the date of transfer to the charitable organization is considered the FMV.
And our final suggestion is one we would give out year round, for any of your money management issues, talk to a CPA. He or she can help you with your financial questions and concerns.