Plan Carefully to Claim This Valuable Tax Deduction

Financial tips

Plan Carefully to Claim This Valuable Tax Deduction

Posted by Infinite Wealth Advisors, LLC
6 years ago | December 4, 2017

Make a DifferenceAs the holiday season gets into full swing, are you feeling charitable? You might enjoy making a difference in the world by giving to charity, or perhaps a particular cause has touched you personally in the past. Whatever your reason for giving, you probably also know that you can earn a valuable income tax deduction for your charitable contributions.

But wait! Before you start writing checks, make sure you understand IRS guidelines for claiming this deduction. Otherwise you could be surprised to learn in the spring that your donations don’t “count” as a tax write-off.

You can only claim contributions to qualified charities. If a particular charity isn’t qualified by the IRS, you will lose your deduction. Plus, it’s a good idea to research potential charities anyway, because there are plenty of fraudulent ones out there. You want your gift to go toward a good cause, not to line a criminal’s pockets. Check with this search tool on the IRS website to ensure that your chosen organizations are legitimate.

Donations must be made by December 31. Like many tax deductions, you can only claim charitable contributions made during the calendar year. If you miss the deadline, though, you can claim your gifts on your 2018 return instead.

Gifts must be valued correctly. If you simply give money to a charity (either cash or via credit card), you can claim that amount in full. However, if you receive something in return for your contribution, such as items from a charity sale, then you can only claim the part of your donation that exceeds the value of that item.

As for donations of household goods or other items, you can claim their current market value – not the amount you originally paid for them. Ask for a receipt when you donate cash or items to a charitable organization.

You must save proof of charitable contributions. If the IRS ever takes a second look at your return, you can lose deductions for items that you can’t “prove” – and possibly owe them more money. So keep receipts in a safe place, and consider backing them up digitally as well.

Consult a tax pro. Like most tax topics, the deduction for charitable contributions can be more complicated than we can fully cover in a blog. The above general guidelines are a good starting point, but make sure to work closely with your tax professional to file your return accurately.

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