Whether you’re concerned about coronavirus relief or promoting greater equality, you can help by donating money to a relevant cause. Charitable donations can benefit you as well when it’s time for tax return preparation. You can report these contributions to the IRS to lower the amount of taxes you owe or increase the refund you’re entitled to receive. If you’re new to the process, here are a few steps to follow when claiming donations on your taxes.

5 Steps to Claiming Charitable Donations

1. Confirm Tax-Exempt Status

To claim a deduction, you must contribute to an organization recognized as tax-exempt by the IRS, such as a 501(c)(3) nonprofit. Some groups, such as political associations and for-profit organizations, may not qualify. To verify this status, find out if the organization is registered and listed on the official IRS database.

2. Count All Applicable Contributions 

Cash donations aren’t the only contributions you can claim. For example, donated goods can be claimed at their fair market value. You can even claim expenses related to volunteer activities, such as fuel costs. 

3. Document the Donation

Hold onto any documentation associated with your contribution, such as an appraisal letter from the nonprofit or a receipt for your donation. While you won’t need these records during tax return preparation, you may need them as evidence if you’re audited by the IRS.

4. Itemize Your Deductions

If you take the standard deduction—the amount the IRS allows every taxpayer to deduct from their adjusted gross income—you can’t claim charitable contributions. Instead, you’ll need to itemize your deductions. This process requires you to list all individual expenses that you can deduct from your taxable income. If you’re not sure whether the itemized or standard deduction is best for you, consult a certified public accountant.

5. Research Contribution Limits  

In most cases, the total charitable donation deduction you can take is up to 60% of your adjusted gross income. However, varying circumstances can change these limits.

For instance, if your contribution involves capital gains, the limit may be reduced. The limit may also be higher for contributions made to qualifying organizations, such as those related to disaster relief.

When you want to maximize your deductions, including charitable contributions, turn to James & Associates in Wailuku, HI. Backed by more than two decades of experience, these certified public accountants maintain an in-depth and current understanding of tax rules and regulations. They’ll help ensure your deductions are claimed and documented correctly and identify opportunities to reduce your tax liability. To learn more about their tax return preparation and IRS representation services, visit this Maui CPA firm online. To schedule a consultation, call (808) 244-2030.