5 Easy Tips to Simplify Your Charitable Giving

Will you be donating to charities this year? The Internal Revenue Service (IRS) reminds us that you must itemize deductions on Schedule A of your tax return to claim a deduction for charitable gifts. The following five tips can also help ensure that your charitable gifts count. These are essential tips to simplify charitable giving effectively.

Tip #1: Give to a qualified charity. Only gifts to a qualified charity are deductible on your income tax return. The IRS offers a handy website, the Tax Exempt Organization Search Tool, to determine whether your favorite organizations qualify. You can also deduct donations made to churches, synagogues, temples, mosques, and government agencies, even if they are not listed in this database.

Tip #2: Give some cash. Gifts of money can be made by check, electronic funds transfer, credit card, or payroll deduction. To claim a monetary gift as a deduction on your tax return, you must have specific documentation, which varies based on the amount donated, such as a bank record (e.g., canceled check, bank statement, credit card statement) or written document from the charity (listing the organization’s name and the date and amount that was given). For payroll deductions, keep a copy of your pay stub(s), W-2, or other employer-provided document showing the total amount withheld, along with the pledge card listing the name of the charity. Following these documentation tips to simplify charitable giving can help you stay organized.

Tip #3: Donate some stuff. You can take a tax deduction by donating your gently used household items (e.g., furniture, furnishings, electronics, appliances, linens) and clothing, as long as they are in good or new condition. If possible, to substantiate your deduction, get a receipt from the charity that includes the organization’s name, date of the contribution, and a detailed description of the donated items. If you leave the items at an unattended drop site, make a written record of the donation with the exact details. By following these steps, you can simplify charitable giving.

Tip #4: Give before the end of the year. Donations are deductible on your tax return in the year they are made. If you donate by check, the deduction applies in the year in which the check is mailed or postmarked. For credit card donations, the deduction applies in the year in which the charge was processed, even if you do not pay the credit card statement until the following year.

Tip #5: Keep good records. Always keep detailed records of any charitable gifts you make. Your records should include the date of the donation, a description of the item or monetary amount given, the name and address of the organization, the fair market value of the property at the time of the donation, and the method used to determine the value. You must obtain a written acknowledgment from the charity if a donation (of either cash or stuff) is valued at $250 or more. If the donation consists of an automobile, boat, or airplane, special rules apply, which can be found on the IRS website. Remember, detailed records are crucial tips to simplify charitable giving.

Have Questions About Deducting Charitable Gifts?

If you have questions about incorporating deductible charitable donations into your estate plan, please book a Discovery Call.