During every season, but particularly fall and winter, Americans receive requests for donations. Many answer those solicitations, happily giving to their favorite charities.But if you want to take a tax deduction for your donations, you’re going to have to be pretty darn generous.
Recent changes in tax law enable you to continue taking a tax deduction for making charitable donations, but few people will reap the benefits.
That’s because the standard deduction nearly doubled when the new tax law took effect in December 2017. For single taxpayers, the standard deduction increased from $6,500 to $12,000; for married filing jointly taxpayers, it rose from $13,000 to $24,000.
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.
One strategy to consider: You can “bunch” deductions every other year or every few years to exceed the standard deduction. That will enable you to meet your charitable giving goals, even if your pattern of giving is sporadic.
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.
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.
Last year the limit was 50 percent of your adjusted gross income. With the new tax law, you can now give up to 60 percent of your income. For example, if your adjusted income is $50,000 and you give $35,000 to a qualifying nonprofit, you can’t claim your full charitable gift in the tax year in which you give. You can claim only up to $30,000.
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 six 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 other donation deduction limits for specific gifts. These rules are more complicated, so you should talk to a tax professional if you’re planning a gift that falls into this category.
Make sure goods are in good shape
In addition to cash gifts — which in the IRS’ eyes include not only currency, but also the previously mentioned donations made with checks and credit cards — you might donate household goods. In this case, you get to count the item’s fair market value as your donation amount.
Donated personal property, however, must be in good or better shape for your deduction to count. This rule was enacted several years ago to prevent people from giving away worthless items to charities and then claiming excessive value amounts as tax deductions.
Regardless of the type of gift, its amount and to which charity you donate it, get a receipt.
The IRS actually demands receipts when a donation is more than $250. In some cases, appraisals also are required.
In most cases, the receipts are for your records only, just in case the IRS later has questions about your deduction. If you don’t get a receipt or other formal acknowledgment from the charity when you donate, ask for one.
A legitimate tax-exempt organization will have no problem giving you a receipt when you make your donation or later mailing (or emailing) one to you.
Even if you don’t get a tax deduction for giving to charity, you at least get the satisfaction of knowing you’re helping out a worthy cause.