Donations to qualified charities, like Giving Center, are tax-deductible, therefor you may use donations to reduce your taxable income and lower your tax bill. You may want to itemize your tax deductions to claim them, this is typically in your best interest if the total of your itemized deductions exceeds the amount of the standard deduction you would receive for your filing status.
How to Claim a Deduction
You can claim a tax deduction for charitable donations on Schedule A. You would claim the total of your Schedule A deductions in lieu of claiming the standard deduction. You can not both itemize and claim the standard deduction.
The schedule is not only for claiming charitable donations. It includes and calculates all itemized deductions you may be eligible for. Other possible itemized deductions include things such as medical and dental expenses you paid for yourself or your dependents over the course of the year, including many insurance premiums. They also include state and local taxes you may have paid and home mortgage interest.
Rules for Claiming the Charitable Contribution Deduction
The IRS has several rules for claiming a deduction for charitable contributions:
- You must donate cash or property. A pledge or promise to donate is not deductible until you actually pay.
- You must contribute to a qualified tax-exempt organization. Charities will let you know if they have the 501(c)(3) tax-exempt status like Giving Center, but there are some organizations, including churches and other religious organizations, that are not required to obtain 501(c)(3) status from the IRS. They count as qualified charities even without the 501(c)(3) status, as do certain trusts and non-profit volunteer fire companies. The IRS provides a search tool so you may check the status of an organization you are considering donating to, or check with a tax professional.
- You must meet several record keeping requirements. This includes saving any canceled checks, acknowledgment letters from the charity or charities, and sometimes appraisals that confirm the value of donated property.
Keeping Records of Your Donation
Your written record must indicate the name of the charitable organization, the date of your generous contribution, and the amount that you gave. Canceled checks work very well because the name of the charity, the date, and the amount of the gift all appear there. Bank statements are great too, when they show a gift paid by debit card, credit card statements work when they show this same information.
Charitable organizations will provide donors with written letters of acknowledgment or receipts. The IRS may not allow charitable donations of $250 or more if you do not have a written acknowledgment from the charity to document your gift, in addition to your other records.
You may need a separate acknowledgment for each gift if you make more than one contribution over this amount. Otherwise, the single acknowledgment have to list each tax deductible donation in detail with the date you made it.
You must be able to substantiate the fair market value of goods or property you donate, including donations of vehicles, boats, or even planes, and you will need a written acknowledgment from the charity for this type of donation as well. You will have to fill out Form 8283 and include it with your tax return if the property is worth more than $500.
Tips for Donating Non-Cash Items
- Make a list describing the items you are going to give away. You will need these details for Form 8283.
- Note the condition of each item and arrive at a value. The IRS will allow a deduction for any item that is in “good working condition or better.” In other words, don’t bother to try and claim a deduction for that old TV in your basement that hasn’t worked in years, even if it only needs a single part. You must have it valued in its current condition without the new part. Save the price tag or the store receipt to prove the item’s value if it’s brand new.
- You can claim a deduction for food and groceries, too. You may deduct the cost if you donate groceries to a charity as well. Be sure to get a written, detailed, signed acknowledgment of your donation — such as “five loaves of Brand X bread; four one-pound packages of hamburger — keep your grocery store receipt to prove the prices of the items.
- Consider taking pictures of your donations. Having a picture handy of what you have donated may be useful, especially if you are donating a lot of items. It’s not technically a requirement, but it wont hurt in the event that your return is audited. Just take a few pictures on your phone, then send the pictures to your hard drive and save them there, too.
- You can prepare your own receipt to prove the tax-deductible donation. If you write it yourself ahead of time, you can just have it signed when you drop off your items. This way you can have piece of mind that the receipt is correct and it includes all the information you need. Rest assured that when you donate to Giving Center, weather large or small, you will get receive a receipt every time.
- Obtain a written appraisal if you are donating property worth more than $5,000. You have to also complete Section B of Form 8283 in this case.
Limits on the Charitable Contribution Deduction
Usually, you may deduct contributions up to 30% or 60% of your adjusted gross income (AGI), depending on the nature and tax-exempt status of the charity to which you are giving. You may deduct contributions of appreciated capital gains assets up to 20% of your AGI.
The limit for cash donations was 50% of your AGI through tax year for 2017. The Tax Cuts and Jobs Act (TCJA) increased this threshold to 60% as of 2018 through at least the end of 2025 when the TCJA is set to expire.
You can carry excess donation benefits over to subsequent tax years if your gifts exceed these thresholds. Excess contributions may be carried over for a maximum of five years.
It used to be that your deduction may be be affected if your AGI was too high, but this rule was repealed by the TCJA.
The AGI income limits for 2017 were $313,800 if you were both married and filing jointly or a qualifying widow(er), $287,650 if you were eligible to file as head of household, $261,500 if you were single, and $156,900 if you were married but elected to file a separate tax return.
The full total of your itemized deductions — not just charitable donations — was limited to 80% of your AGI or 3% of the amount by which your income exceeded the limit, whichever was less, if you happened to earn more than these thresholds.
It’s something to keep in mind if you are filing a tax return for a previous year.