Donating to a charity is a wonderful way to give back to the community and support a specific cause. However, this act can also have a positive benefit on your taxes if you claim these donations as a deduction. If you’re new to this aspect of tax planning, here are a few points to know before you prepare your return and file it with the IRS.
What Are the Benefits of Charitable Deductions?
When you prepare your annual return, deductions help you reduce the total income upon which you are taxed. If you don’t take the standard deduction—ranging between $12,200 and $24,400, depending on your filing status—you can include charitable donations with your itemized deductions.
Depending on the nature of the charities you donated to, you may be able to claim donations of up to 60% of your total adjusted income. As a result, charitable giving could potentially reduce your tax liability more significantly than the standard deduction.
What Counts as a Charitable Deduction?
A charitable donation could be a monetary gift or noncash item given to an organization within the applicable tax year. If you donate a good—such as food, clothing, or a car—you can claim the fair market value of the item.
To claim the deduction, you must give it to a charity that is registered as a tax-exempt organization under the IRS—such as a 501(c)(3) nonprofit. If you’re unsure if an organization applies, you can see if it's registered on the IRS website.
How Do I Make a Claim?
To claim a charitable donation, report the total amount given on the Schedule A form of your tax return.
If you are audited by the IRS, you may need proof of the donation—such as receipts—to show that deduction is valid. If a CPA is preparing your taxes, provide them with receipts and other records so they can optimize your paperwork.
Whether you want to take the stress out of tax preparation, Donna Sellers, CPA is here to help. Serving individual and business clients in Brownfield, TX, this certified public accountant will process all your financial records to ensure your return includes all relevant credits and deductions to help lower how much you have to spend on taxes. Well-versed in current tax codes and procedures, Sellers will also take care to ensure your return is filed accurately and in a timely fashion. Visit this professional online to learn more about these accounting services or call (806) 637-8556 to schedule a convenient consultation.