Giving to charity can be tax-deductible, and charitable giving can be utilized as part of your year-end tax planning if you're looking to boost your deductions. Here's some tips to help you preserve your charitable deductions.
Research Charities Before Giving
Charitable donations are tax-deductible if given to qualified charities. To be a qualified charity, the organization must have received tax-exempt 501(c)(3) status from the IRS or be a church or religious organization not required to obtain 501(c)(3) status. JoAnne Fritz, the About.com Guide to Non-Profit Charitable Organizations, provides several ways to research charities, such as online tools for confirming whether a non-profit is registered with the IRS.
Document Your Donation
Keep proof of your donation, such as a canceled check, bank statement or credit card statement. Charities might also provide you with a letter acknowledging your gift; keep that acknowledgement letter along with your tax records. You'll need proof of your donation should the IRS want to verify your donation.
Can You Deduct It?
Donate This Year or Next?
Donations are deductible in the year donated. Donations must be made before the end of the year in order to be deducted on this year's tax return. IRS instructions clarify that checks mailed this year will count as a deduction for this year and that a donation made by credit card will count for a deduction this year if the charge is posted to your account this year.
Consider Bunching Your Donations
For people who are close to itemizing because their itemized deductions are just below their standard deduction, consider a strategy of bunching your deductions. This can work well with charitable giving. By donating to charity in alternate years, you may be able to generate more tax-savings by alternating between one year with a standard deduction and the alternate year with itemized deductions. To bunch charitable donations, you could defer any charitable gifts you would make at the end of the year until early next year, and then take the deduction next year. Similarly, if you're bunching deductions for this year, you could accelerate any gifts you might other give next year to get a larger deduction this year.
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