As you probably already heard, today is #GivingTuesday. We join the millions of folks around the world giving to their favorite causes and nonprofits – because we believe in doing good and doing well.
But did you know that by doing good by giving to charity, you can also save money on your taxes? Most folks know something about the charitable deduction, but how does it really work and what do you need in order to claim it?
The Calculation is Simple
Generally, you can deduct up to 50% of your AGI (Adjusted Gross Income) for contributions to registered charities/nonprofits. (That’s A.K.A. 501(c)3’s if you’ve heard that term…) Most charities should note prominently on their website or printed materials that they are registered, official nonprofits. If you don’t see that anywhere, ask to make sure. You can also search for the nonprofit on the charity vetting website GuideStar.org.
So if your AGI is $30,000 and then you could give away $15,000 to charity and receive a full tax deduction for all of it! (There are limits if your AGI is high, so check with us if you want an exact calculation.) That’s a crazy-awesome tax benefit to giving!
Remember that the deduction also applies to both cash and non-cash donations. So if you donate used clothing or housewares to Goodwill throughout the year, the value of those items is deductible as well.
Make the Gift, and then Make the IRS Happy
Be sure that you receive a receipt for any donations to charity. If a cash gift is made, your receipt should note that no goods or services were received/performed as well. If it doesn’t, please ask to have it amended to reflect that. (In 2012, the IRS disallowed $22,000 in donations to a church because the taxpayers’ receipts did not say that. Ouch!)
For donations of goods, be sure to keep the receipt and make notes that are as precise as possible as to what was donated so that you can later value it appropriately.
Family Philanthropy and Estate Gifts
There are a variety of other tax advantages to giving if you are looking to give large dollar amounts to charity in life or in death. A few of them are discussed here by Ameriprise financial advisor, Michael Gluski. Charitiable trusts and family foundations are two of the most common. Let us know if you’d like more information on legacy gifts like these – we’re here to help!
So Now You Know…
… that there’s really no excuse NOT to give a charity a donation today on #GivingTuesday or any other time of year. If you want to give but don’t know how to select a charity, feel free to read our recent post on Team Holly’s favorite nonprofits. Happy Holly-Days! #payitforward