Charitable Donations Can Provide Valuable Tax Deductions

In addition to your holiday shopping and festivities, you might feel like contributing to a charity at this time of year. But because your charitable donations can help you earn a valuable tax deduction, it’s important to learn the rules regarding these tax incentives.

Choose the right charities. You probably want to donate to a particular cause, but not all charitable organizations are approved by the IRS. So, if claiming a tax deduction is important to you, check to be sure your organization of choice is registered with the IRS.

Avoid scams. Remember, not all telemarketers represent real charities. At this time of year especially, con artists set up bogus organizations to cash in on widespread feelings of generosity. A fake charity’s name might sound quite legitimate, so be prepared to do your homework. Also, some real charities really don’t put much of their contributions toward the actual cause they represent, but a quick internet search should help you discover their true operating costs.

Keep records. You can’t claim charitable contributions as tax deductions unless you keep the proof. Otherwise, if your return is ever audited, you could lose the deduction and owe more money to the IRS. So, keep receipts of your donations, or copies of debit and credit card statements if you pay by card.

Streamline the process next year. If you usually claim charitable donations on your tax returns, then this tactic has become part of your annual tax planning strategy. You can streamline the process in future years, to ensure that you reap your maximum deduction while also making it easier to keep records. Simply set up automatic contributions via a credit card at the beginning of the year, and you don’t have to think about this issue until the next January.

Look for alternatives to cash donations. You don’t have to donate cash to a charity, in order to claim this valuable tax deduction. You can also donate stock, real estate, personal property, or even make direct gifts via IRA distributions. This is an issue to discuss carefully with a financial professional before making a decision, so give us a call and we’ll be happy to help.