Charitable donations are an excellent way to give back to support important causes and to also reduce your tax bill. They can be tricky, however, and are a common cause for IRS audits. It’s essential that you follow the tax preparation guidelines to ensure your donations are classified as tax-deductible and file them correctly to avoid complications.

How to Properly File Charitable Donations

1. Carefully Vet Your Recipient

You need to ensure you’re making a donation to an approved charitable organization. Those that are not designated by the IRS will not qualify. You also can’t make donations to an individual. Once you’ve found a reputable charity, ask to see their IRS designation letter so you know they’ll qualify.

2. Get Receipts

You want a receipt for every donation you make, even if it’s cash. This is your proof to the IRS that you made the donation. These organizations will provide a receipt listing their contact information, the date, and the number of goods/money donated. Should the IRS have questions after you file, you can present this receipt.

3. Itemize

The IRS allows you to deduct up to 50% of your gross income as charitable donations, and you’ll need to itemize all of it. You’ll do this on a Schedule A form. Here you’ll list all goods donated to a charity, all money donated, as well as professional time donated as a volunteer.

Know that if you donate an item valued greater than $500, you’ll need to file a Form 8283 with your Schedule A. This comprehensive breakdown lets the IRS know every detail of your donations, so keep a complete record throughout the year.

4. Maximize Appreciation

Donating items, such as stocks or real estate, that have increased in value is a great way to reduce—or even eliminate—capital gains tax. So long as you’ve owned the item for one year, you can deduct its fair market value. Instead of selling a piece of land and then gifting the complete profit to a charity, you can simply donate the land.

If you need a hand with tax preparation, Simplified Tax of Sparta, WI, will assist. This company has welcomed customers for over 30 years and provides a variety of accounting services. Whether you need assistance with payroll, tax preparation, or managing returns, they’ll ensure you’re covered. Call (608) 269-2633 to schedule a tax consultation.