Charitable Giving: How Your Gift Gives Back

There’s no doubt that it feels great to help someone in need through charitable giving. There are more than 1.5 million nonprofit organizations in the United States that range from food banks and disaster relief centers to churches and cultural centers. And in 2018, Americans contributed over 4 billion dollars to charitable organizations. 

While you may have altruistic reasons for donating to a charity that you support, there can also be tax benefits that come along with donations. Here are some important things to discuss with your tax professional when thinking about donating a significant gift to an organization, whether monetary or otherwise. 

Itemize Your Deductions

Charitable donations can help reduce your taxable income and may mitigate your tax liability. People usually itemize when they anticipate that their deductions, including charitable contributions, will add up to more than the standard deduction. The standard deduction usually increases every year due to inflation, so be sure to check with a tax professional to see what the standard deduction is for the year that you’re filing for. 

Itemizing deductions entails tracking and adding expenses that may reduce your tax bill. You should make sure to keep track of all charitable donations throughout the year so you have an accurate record of what to include in your itemized deductions. 

Keep Accurate Records 

In order to report accurate information on your taxes, keep a careful record of your charitable contributions every year. If you make a monetary donation, the organization will provide you with a tax receipt. In instances where you make non-monetary donations, you may want to get a qualified appraisal to submit when filing your taxes to substantiate the deduction that you’re claiming.

There are some specific guidelines to how much you can claim for certain types of donations, if you have questions, please consult with a tax professional. If you’d like to include donations like this on your taxes, you should steer clear of dumping them in a donation box, because you won’t have any record of the value of the items that you donated. 

Pay Attention to IRS Guidelines 

In order to avoid an audit, be sure to keep yourself informed and up to date with IRS guidelines for charitable giving. The charities that you contribute to should be qualified 501(c)(3) charities or private foundations. If you contribute to a political campaign or a neighbor in need, you cannot consider those donations tax deductible. There are also some limitations to how much you can deduct for charitable donations, please consult with your tax professional regarding these limitations.

If you are audited, the IRS will need substantial evidence of your monetary donation. Your donation can be substantiated only with a canceled check, credit card statement, bank statement or a written acknowledgment from the charity. You should keep a receipt from the charity that lists the charity's name, the value of your gift, the date you made your donation and a statement verifying that you did not receive any goods or services in exchange for your gift.

In all cases, to understand the tax implications of your charitable giving, be sure to consult with a tax professional.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Neither Capital Resource Management nor LPL Financial offer tax advice. Copyright 2024 Advisor Websites.