Charitable Giving and Taxes
Giving not only does your soul good, it can also help when it comes time to file taxes. If you’re in the habit of giving to charity, you should also be able to take a nice big deduction when you file your taxes. Thanks to the charitable contribution deduction, the Internal Revenue Service allows you to reduce your income by the amount of your donation. In order to take the deduction, you have to meet a few guidelines and make sure that you’ve got the proper documents.
What Donations Can Be Deducted
If you give money or goods away, it doesn’t necessarily mean that you’ll be able to take a deduction on your taxes. In order to take the deduction, you must give the goods to a qualified charitable organization. The organization must either be a church or government organization, or file with the IRS as a qualified charitable organization.
When you give money to one of these organizations, it is important to make sure that you have some kind of documentation. While you don’t necessarily need documentation in order to claim the deduction, you will need it if the IRS decides to audit you. The type of documentation you have can vary. For example, if you give money to a charity, they will probably give you some kind of a receipt that shows how much you gave. If you give money to a church regularly, the church will most likely give you a year end summary with all of your gifts totaled up.
If you give money to a charity and you don’t get some kind of a receipt, you could also use some other type of document to prove that you made the donation. For example, a bank statement or a credit card statement would do the job. If you give money by sending a text message to a charity, the phone bill could even work as your proof.
When giving money to a charity, you can give as much as you want. However, you will only be able to deduct up to a maximum of 50 percent of your annual income. If you give more than that, you won’t be able to claim a tax deduction for it.
Overall, charitable giving can be very rewarding. If you plan on giving, just make sure that your financial records are in order so that you can take full advantage of the gift.