taxes

Get a tax deduction for charitable giving

Each year as Dec. 31 draws near, Americans are bombarded by requests for donations. Many answer those solicitations, happily giving to their favorite charities.

This year-end generosity also might pay off at tax time, as long as you know and follow the IRS's rules on tax deductions for donations.

The word 'give' on white cubes © schatzy/Shutterstock.com

Itemizing required

You can give thousands of dollars, but if you claim the standard deduction amount on your tax return, your charitable gifts will do you no tax good. You must itemize expenses on Schedule A to deduct charitable donations.

The good thing about donations is that, in most cases, there is no limit on how much you can deduct.

Timing is everything

Donations must be made by the end of the tax year for which you want to claim the deduction. If you put a check dated Dec. 31 in the mail by that day, you're OK. So are donations charged by year's end to your credit card, even if you don't pay the card's bill until the next year.

Check out the charity

Only contributions to IRS-qualified charities are deductible. This means the group meets Uncle Sam's requirements to be classified as a tax-exempt organization. You've probably heard this referred to as 501(c)(3) status, so-called because that is the section of the Internal Revenue Code that governs such groups.

Ask the charity to which you plan to give for information on its tax status. Reputable nonprofits will be more than happy to offer proof.

You also can check out groups via various online databases, such as GuideStar and Charity Navigator, as well as by using the IRS' own online searchable database of exempt organizations.

Know your limits

Remember that phrase "in most cases, there is no limit on how much you can deduct" mentioned earlier in connection with itemizing? That applies to most people, but for some very generous folks, there are limits on tax deductions for donations.

Most public charities are known as 50 percent organizations. They get this name because donors' deductions are limited to 50 percent of their adjusted gross income. For example, if your adjusted income is $50,000 and you give $30,000 to a qualifying nonprofit, you can't claim your full charitable gift in the tax year in which you give. You can only claim up to $25,000.

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Giving to charity is the gift that keeps on giving. Especially when the tax-man comes knocking.

It's the season of giving and what better way to spread holiday cheer than to give to your favorite charity? If you are so generous this holiday season, you might be in for a tax break, but you need to follow some steps to make sure you get credit.

If you take the standard deduction when filing your taxes, you won't get any credit for your charitable donations. Keep a receipt and make sure you itemize your expenses on schedule A.

Keep in mind that if you want to benefit on the upcoming tax season, you have to make your donation by December 31st. Any donations made after December 31st will have to wait all the way until the next year's tax season.

Finally make sure the charity counts towards your taxes. Only donations to IRS-qualified charities can be deducted.

However, the other $5,000 isn't lost. You can claim the excess donation amount on your next year's tax return. You have up to five years of "rollovers" to claim the full charitable gift.

Most of us won't have to worry about this limit, but in case you come into some unexpected cash and want to share it with a charity, take into account the deduction limit.

There also are 20 percent and 30 percent donation deduction limits for specific gifts and the groups -- typically private charities -- that receive them. These rules are more complicated, so you should talk to a tax professional if you're planning a gift that falls into this category.

Also, higher-income taxpayers might not get the full benefit of their total itemized deductions, including charitable gifts. The Schedule A total is reduced for taxpayers who make more than $150,000 if married filing separately, $250,000 if single or $300,000 if married filing jointly or as a qualifying widow or widower.

These limits are adjusted annually for inflation. The current tax year's limitation amounts for each filing status can be found in the itemized deductions worksheet in the Schedule A instructions.

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