As 2012 edges to a close, tax planning should be in the back your mind. Donating to charity is one way of reducing your tax burden while helping those in need. While charitable donations are deductible up to a maximum of 50% of your adjusted gross income, there are some things to keep in mind when making donations:
Make sure to donate to qualified charitable organizations. You can either ask the charity about its tax-exempt status or find the organization on IRS.gov for more information.
In order to deduct charitable donations, you must itemize your deductions instead of taking the standard deduction. Other itemized deductions include medical expenses (over 7.5% of your adjusted gross income) state & local taxes, real estate taxes and, mortgage interest. If your total allowable deductions are greater than the standard deduction, you can itemize your deductions.
Non-cash donations like clothes are only deductible up to the thrift shop value, not what you paid for them. If donating to Goodwill or a similar organization, it always helps to ask for a receipt. Values for most items can be found here.
Good records should be kept of any and all donations made throughout the year including the charitable organization, amount donated, and the date of donation.
Any cash donation over $250 must be listed separately with the name of the charity and the amount detailed on tax return. Any non-cash donation over $500 must be listed with the name of the charity, the date of donation, what was donated (clothes, household goods, etc.) and the value of the property donated detailed on tax return.
- Keep in mind that a donation made on December 31, 2011 is deductible on your 2011 tax return while a donation made on January 1, 2012 is deductible on your 2012 tax return. One day can result in the delaying of the tax benefits for an entire year.
So as 2013 draws closer, consider the above, and make those donations before the end of the year.
For more information on our Tax Planning & Preparation Services, leave a message below or contact Michael Gross by calling 440-449-6800.