Individuals make up 72% of charitable giving to nonprofit organizations in the United States according to the National Center for Charitable Statistics. If you would like a tax benefit as a result of your charitable giving, here are some tax rules to keep in mind.
- Itemize–On your federal tax return, the charitable deduction is only available if you itemize deductions on Schedule A. In Colorado, if you don’t itemize but take the standard deduction at the federal level but have charitable contributions over $500, the amount over $500 may be deducted as a charitable deduction. I only speak for Colorado so check your state tax code to see if it has anything similar.
- Contribute to Qualified Organizations–Want to give money to a church, school PTO, or other 501(c)(3) non-profit organization? Those are qualified organizations, for others see here. See a friend’s Go Fund Me website and want to contribute? Although it is a very charitable action, the IRS does not allow deductions for contributions made to an individual. Also to keep in mind during this political cycle, most political contributions also cannot be deducted as a charitable contribution.
- Keep Receipts–Did you donate clothing/household goods to Goodwill and Salvation Army but not pick up the receipt given at the drop-off station? The IRS seems to be getting more picky on documenting donations. When giving cash or non-cash items, always get a receipt with at least date, amount of donation, and organization donated to, and tuck it away with your other important tax papers during the year.
- Non-Cash Goods Valuation–Speaking of Goodwill, Salvation Army, and all the other organizations that take noncash goods, you are the one (not your tax professional although they can help) assigning the donated value to the goods. Goodwill and Salvation Army have good valuation guides so use them (or find one for your specific organization) based on the condition of items donated. If the value of noncash items donated on your return is anticipated to go over $5,000 (whether one item or multiple), an appraisal is needed or the noncash donations will be capped at $5,000 (unless you are asking for an audit).
Go forth and be charitable and tax-wise!