Tax season is almost over, but many people still have questions about taxes, even if they already filed them. As a philanthropist, I often hear the phrase, “Your donations are tax-deductible.” Although in theory we know what this means, how does this actually play out when tax time comes around? And is there a threshold before the deduction requirement is met? Let’s see if your charitable giving will pay off during your tax return.
Giving, Not Receiving
Many people enjoy participating in charitable events, such as auctions or fundraisers. However, if you’ve given to charity and received something in return you likely cannot count that donation on your tax return. There is no way around this, so if you are planning to give a large amount of money to an organization, you may want to consider whether it is better to give it for something you do not really want, versus nothing. You may end up receiving more in the long-run.
Most large-scale charities you’ll come across are recognized by the IRS and considered tax-deductible. However, many local charities and causes are not recognized by the government and you will not be able to deduct your donations. This should not hold you back from donating to a good cause, but keep yourself in check and do not expect a larger return because of it.
Donating a Car
If you plan to buy a new car or live in a city where one is unnecessary, donating your car may seem like a good idea. I suggest reconsidering, as the IRS is notorious for denying these deductions. Rather than donating the car itself, you may want to sell it and gift the cash you pocket instead. This can save you and the charity from audits.
Donating Low-Cost Items
Do you have an old computer you don’t need, or you’re tired of last year’s wardrobe? Many charities accept hand-me-downs from the community, which may be tax-deductible. The caveat is that the items must be in good or better condition, and you must receive a receipt for the donation. The items can also only be deducted for their market value, not their original purchase price. Also, you cannot deduct items you put in a donation bin, as you will have no receipt from the charity.
I am passionate about charitable giving and helping others in need. Ultimately, you should give to a charity because you care about the cause, not because you want to get a bigger tax return. Although there are many tricky laws surrounding charity deductions, take the time to brush up on them and see how much you may be eligible to deduct.