If you opt instead to take the standard deduction when you file your return -- the choice made by most taxpayers -- your donations will still help the organizations you give to, but they won't help cut your tax bill. You can't add your donation totals to your standard deduction to increase that amount.
So how do you know whether you should itemize or claim the standard deduction? Start by finding your standard deduction amount, which is adjusted annually for inflation. Then add up your deductible expenses, such as your charitable donations, plus mortgage interest, plus real estate taxes and the like, to determine if that total is more than your standard deduction. If so, you'll want to itemize.
Tallying your tax benefit
OK, you've determined that itemizing is the way to go. Now it's time to tally your big-heartedness.
A nice thing about charitable contributions is that, unlike medical or miscellaneous deductions, there is no threshold amount to meet. You can give as little as $5 and still add it to the rest of your itemized deductions.
You're also not limited to monetary donations. You can give merchandise, appreciated assets, count the miles you drive for a worthy cause, even deduct part of the price of a ticket you purchased to attend a charity event.
But there are still a few IRS rules you must follow to make sure your contributions pay off at tax-filing time.
To be tax deductible, charitable contributions must be made to qualified organizations. This is especially important when disasters prompt giving; too often, con artists use such tragedies to take your money and give nothing to those suffering. Organizations can tell you whether they are qualified and if donations to them are tax deductible. You can also read the charity's literature to ensure that it is fully recognized by the IRS.
For complete peace of mind, check out the agency's online list of exempt organizations or call the IRS toll-free at (877) 829-5500 and ask about the group's tax status.
If you get anything in return for your donation -- merchandise, goods, services, admission to a charity ball, banquet, theatrical performance or sporting event -- you can deduct only the amount that exceeds the fair market value of the charity's thank-you token or benefit. For example, if you give your local PBS station $100 and get a $25 DVD of a "Masterpiece Theater" performance in return, you can only deduct $75.