So many thoughts come to mind when thinking of March. – Spring! Longer Days, warmer weather & Taxes
Each donation impacts lives. Because of your donation, we can do what we need to do to provide safe and affordable housing for low-income families in Carteret and Onslow Counties. That includes items not for the families we serve but for the tools needed to effectively serve.
Donations to our 501C-3 are tax-deductible expenses that can reduce your taxable income and lower your tax bill.
For example, a donation to Habitat through your IRA can help reduce your taxable income. If you’re 70.5 or older, you’re eligible to make a qualified charitable distribution directly from your IRA. You can carry the excess over to subsequent tax years if your gifts exceed these thresholds. Excess contributions can be carried over for a maximum of five years.
Help us work towards a world where everyone has a decent place to call home.
Not to leave you empty-handed, here are some tips to help you in this tax season.
How to Claim a Deduction
You can claim a tax deduction for charitable giving on Schedule A.2 The total of Schedule A then transfers to line 9 of the new 2019 Form 1040. You’d claim the total of your Schedule A deductions in lieu of claiming the standard deduction. You can’t both itemize and claim the standard deduction as well.3
The schedule isn’t just for claiming charitable donations. It includes and calculates all itemized deductions you’re eligible for. Other possible itemized deductions include things like medical and dental expenses you paid for yourself or your dependents over the course of the year, including many insurance premiums. They also include state and local taxes you might have paid and home mortgage interest.
Rules for Claiming the Charitable Contribution Deduction
The IRS imposes several rules for claiming a deduction for charitable contributions:
You must actually donate cash or property. A pledge or promise to donate is not deductible unless and until you actually pay.
You must contribute to a qualified tax-exempt organization. Charities will let you know if they have 501(c)(3) tax-exempt status, but some organizations, including churches and other religious organizations, are not required to obtain 501(c)(3) status from the IRS. They count as qualified charities regardless, as do certain trusts and non-profit volunteer fire companies. The IRS provides a search tool so you can check the status of an organization you’re considering donating to, or check with a tax professional.
You must meet several recordkeeping requirements. This includes saving canceled checks, acknowledgment letters from the charity or charities, and sometimes appraisals that confirm the value of a donated property.
Keeping Records of Your Donation
Your written records must indicate the name of the charitable organization, the date of your contribution, and the amount that you gave. Canceled checks work well because the name of the charity, the date, and the amount of the gift all appear there. Bank statements are good, too, when they show a gift paid by debit card, and credit card statements work when they show this same information.
Charitable organizations will often provide donors with written letters of acknowledgment or receipts. The IRS can disallow charitable donations of $250 or more if you don’t have a written acknowledgment from the charity to document your gift, in addition to your other records.
Tips for Donating Non-Cash Items
- Make a list describing the items you’re going to give away.
- Consider taking pictures of your donations.
- You can prepare your own receipt to prove the tax-deductible donation.
- Obtain a written appraisal if you’re donating property worth more than $5,000.
You must be able to substantiate the fair market value of goods or property you donate, including vehicles, boats, or even planes, and you’ll need a written acknowledgment from the charity for this type of gift as well. You must fill out Form 8283 and include it with your tax return if the property is worth more than $500.
What’s Not Deductible
- Gifts made to political parties, political campaigns, or political action committees
- Gifts donated to individual people
- Contributions to labor unions, chambers of commerce, or business associations
- Contributions to for-profit schools and hospitals
- Contributions to foreign governments
That still allows for a lot of charitable giving to whittle away at your tax liability.