IRS issues reminders for taxpayers looking to donate
It’s the time of year where you may be feeling led to give back by donating your time, property and money to the charity that means the most to you. Receiving a tax deduction on your charitable donation is not a reason to give, but it does offer auxiliary benefit to your generosity.
Not all donations are deductible. Contributions to individuals are never deductible. To be deductible, you must make charitable contributions to qualified organizations. Unsure if your favorite organization is qualified? The IRS has a tool that can help ensure your donations are as beneficial as possible. Tax Exempt Organization Search on IRS.gov allows users to search for tax-exempt charities. Taxpayers can use this tool to determine if donations made to an organization are tax-deductible charitable contributions.
“Before you pull out your check book, it’s important to stop and think about what type of contribution you are actually making,” CPA Angie Svitak advises her clients. “Is it a charitable donation, or really just advertising? If you are making a donation to your child’s school and receiving a benefit from it—perhaps through name recognition or advertising—then it’s advertising, and should be coded as such.”
Angie Svitak, CPA
LIMITATIONS ON DEDUCTIONS
In general, contributions to charitable organizations are not deductible in your corporation. Rather they are deducted on your personal tax return generally up to a maximum of 50 percent of your adjusted gross income. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30 percent adjusted gross income. The Tax Exempt Organization Search linked above uses deductibility status codes to indicate these limitations.
ADDITIONAL OPTIONS FOR THOSE Over 70.5
There is another way that people age 70.5 can benefit from charitable giving tax deductions. A qualified charitable donation can satisfy all or part of the required minimum distribution from your IRA. When the required minimum distribution from an IRA is paid directly to the qualified charity, the taxpayer would not have to pay tax on this distribution.
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, 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.
Donor Advised Fund
If you haven’t identified a particular organization to donate to, you can open a donor-advised fund which allows you to contribute money to the fund and receive a tax deduction in that year and then identify the organization and distribute the funds to them at a later date. Additional information on how the donor-advised account works.
Have you been making the most of your tax benefits this year? Consult our end-of-year checklist or contact us for a complimentary review. A member of our team can address your specific concerns and offer some initial guidance at no charge.