Two Methods For Charitable Tax Deductions

Did you know there are two deduction methods for when a taxpayer to take a tax deduction for a charitable contribution?

A standardized deduction- This is the fixed dollar amount you are entitled to deduct from your AGI solely based on your personal filing status.

An itemized deduction- This method lists every item you qualify for as a deduction.

If you donate to a qualified charity or non-profit organization, like Giving Center, you may be able to claim the charitable donation as tax deduction on your tax return.

Learn more about charitable contributions and your tax return:

• Deductible Charitable Contributions
• Qualified Charitable Organizations
• Benefits
• Other Tax Deductible Contributions
• How To Deduct Charitable Contributions

Deductible Charitable Contributions

A deductible charitable contribution is a donation made to a IRS qualified organization. The donation has to be made voluntarily and with no expectation of any substantial reward or benefit. Generally, you may deduct any cash donations you make, and you can deduct the fair-market-value of all donated property, such as real estate, jewelry items, or cars. You may also get a deduction for the donation of stocks.

Cash Donations

A cash donation encompass money contributed by check, credit card, electronic funds transfer, or payroll deduction. The donation can’t exceed 60% of your Adjusted Gross Income (AGI) to qualify as a tax deduction. You have to obtain a receipt for any amount of money you donate in order for your donation to be qualified.

Other Types Of Donations

You may deduct the fair market value of jewelry, real estate, or items such as furniture, collectible art, musical instruments, and electronics. Any donated item must be new or used but in good condition. There is no real method for determining the value of donated items, but if you need guidance, please see IRS Publication 561 — Determining the Value of Donated Property.

Car and Vehicle Donations

You may donate cars, trucks, boats or even planes. The value of your generous donation will be determined by how the charitable organization uses it. The organization will provide you with paperwork about how the vehicle was used and, if it was auctioned, what the selling price was.

A non-profit organization will usually either auction a vehicle, refurbish it and donate it, or make use of it themselves. If your car is sold at auction for greater than $500, you may deduct the full selling price of the vehicle on your tax return. But if your car is auctioned for $500 or less, you may deduct the greater of the selling price or the fair market value. This means you will usually be able to deduct at least $500.

If a car is refurbished or repaired, and then gifted or sold to a needy buyer, you can usually deduct the fair market value of the vehicle. If the vehicle is then used by the organization for other purposes, you may also deduct its fair market value.

Qualified Charitable Organizations

Before you make your donation, you may want to check the organization to make sure they are qualified to receive tax deductible donations. You can use the IRS Tax Exempt Organization Search tool to help you find qualified exempt charitable organizations. You might want to double check the qualified status of smaller charitable organizations before you donate. Many organizations can lose their tax-exempt status because they do not file the required documents for three consecutive years. Donations to those organizations are no longer qualified as tax deductible.

Organizations That Are NOT Qualified as Charitable

Donations to the following types of organizations are not tax deductible:

• Individuals
• For-profit institutions
• Labor unions
• Lobbying groups
• Chambers of commerce
• Civic leagues
• Most foreign organizations
• Sports and social clubs
• Homeowners’ associations
• Tuition
• Political candidates or organizations
• Foreign or unrecognized governments
• Value of donated blood

Transportation Costs and Other Charitable Expenses

You may able to claim the some expenses as a tax deduction for charity purposes:

• Transportation Expenses: You can also generally deduct the costs of transportation, including using gas in your car to travel to and from the location where you are performing the charitable services.
• Out-of-Pocket Expenses: You may generally deduct any out-of-pocket unreimbursed expenses incurred while working with a qualified charitable organization as a volunteer if the expenses happen to be directly related to the services being performed.
• Expenses for Housing Students: You may deduct any expenses incurred for housing a student sponsored by a qualified charitable organization.

Other Tax Deductible Contributions

• You may also claim tax deductions on appreciated stocks and donations to organizations who provide disaster relief.
• Cash and property are not the only things you may donate to charity for a tax benefit. Contributions of appreciated stock can provide you with tax savings. You may donate stock that has risen in value, as long as you have owned it for more than a year, while avoiding any capital gains tax. If you sold your appreciated stock for cash, you would have to pay tax on the amount of appreciation. If you donate appreciated stock instead, you can deduct 100% of the value on your tax return.
• Donations to organizations which provide overseas disaster relief are tax deductible as only if the group in question is based in the U.S. and has full control over the distribution of all donated funds. Before you contribute, check and make sure the charitable organization is qualified, and to keep a record of the donation.