‘Tis the season for tax deductible donations. A few weeks remain to shave a few dollars from your tax liability and spread a little holiday goodwill, if you follow IRS rules about donating to charities. After taking a hit during the recession, charitable contributions increased in 2010, which is being taken as a sign of economic recovery.
Finding qualified charitable organizations
Tax deductible donations to charity can lower your tax bill, but you must itemize your tax deductions. The IRS only allows donations of money or property to be tax deductible if they are made to qualified organizations. The IRS provides taxpayers a list of eligible organizations on its website in a document called IRS Publication 78. Charities also make sure to inform everyone that they have the tax exempt status, called 501(c)(3), that makes them eligible. Never forget that getting tax deductions for donations legally requires good record keeping.
Follow IRS record keeping rules
Most people take advantage of tax deductible donations by contributing property — clothes, furniture, appliances, TVs, etc. Property donations to charity fall under strict IRS record keeping rules. It’s important to get a receipt from the charity and reasonably determine the fair market value of the donated property. Property donations can be a tax deductible for up to 30 percent of adjusted gross income. For cash donations to charity of $250 or more, your records must include the name of the charity, the date of your donation and the amount. Cash donations to charity can be deducted in full for up to 50 percent of adjusted gross income.
Charitable donations a win-win
Charitable donations are making a comeback this year, now that Americans have a little more confidence that they will hold on to their jobs. According to the Nonprofit Research Collaborative, 36 percent of U.S. charities said donations increased in the first three quarters of 2010 — a 23 percent increase from last year. Charities are aware of this trend, and sometimes the sheer number of pleas for donations this time of year can get on one’s nerves. But it’s important to keep in mind that charitable donations are not only good for your tax bottom line, a carefully researched contribution will make a meaningful difference.