You’ve been a good citizen all year long, donating your hard earned cash and possession to help you favorite charities thrive. While you love the feel good factor that comes along with your charitable donations, you also wouldn’t mind getting some credit for your good work from Uncle Sam in the form of tax deductions. Turns out that the tax man is almost as generous as you are when it comes to charitable donations and will let you write off a substantial amount – up to 50% of your adjusted income – if you’ve been a big giver. The trick is, however, that you have to have all the paperwork in place. Without the proper documentation, you won’t be able to claim your donation on your tax return.
The first step in documenting your charitable donations is keeping a record of the amounts of your donations, both cash and non cash. If you make several donations a years; for instance, if you have a direct debit set up giving your favorite charity $50 per month, you have to count each donation as a single donation. Giving $50 per month over a year means you have made twelve $50 donations, not one $600 donation. If you have donated some cash, some old furniture, and a car to a charity, give each donation its own value and count them as separate donations, even if you have everything on the same day.
When you know how much you donated to charity during the year, separate the cash donations into those that were for less than $250, and all the donations for more than that amount. For cash donations under $250, you will need a copy of your cashed check, made out to the charity, a credit card statement showing a payment to the charity, or a bank statement showing a transfer to the charity’s account. You should also get a receipt from the charity with the amount of the donation and the date on which it was received.
For cash donations over $250, you must have a written note from the charity saying the amount of your donation, the date is was received, whether or not you received anything in return for your donation, and if so, an estimate of the value of the things (goods or services) that you may have received. Ideally, the letter should be dated within 30 days of the donation.
For non cash donations under $250, ask the charity to give you a dated receipt detailing the property received from you and giving an estimate of the value of the property. If your non cash donation is worth more than $250, but less than $500, get a receipt stating all of the things listed above, but also include whether or not you received anything in exchange for the contribution, and the approximate value of anything received. For non cash donations worth between $500 and $5,000, your records will need to be a little more detailed. In addition to all of the information you need to keep for lesser donations, your records should state when you purchased the property, and if you owned the property for less than 12 months, the purchase price of the property. If your non cash donation is worth more than $5,000, you will need to get a qualified appraiser to price the property before the donation and give you a dated record of their appraisal.
Charity donations can be a winning idea for both the charity and you. Keep the records you need, and the government will reward your good work with money saving deductions at the end of the year.
