It’s well-known that if you make certain charitable donations you have the opportunity to claim a tax deduction and reduce the amount you pay. Nevertheless, you have to make sure it’s marked correctly on your taxes. If you don’t, you’re going to be in trouble with the IRS.
The last thing you want is an audit!
Donate to Eligible Organizations
You can’t donate to any charity of your choice. It has to be registered with the IRS before tax deductions can count. On the IRS website, you will find a huge list of charities that count for tax deductions. Just remember that only monetary donations count. Time spent volunteering can’t be written off on your tax returns.
You must have paper evidence from the charity that your donation was received. This must be an official document, so make sure it isn’t simply a number scribbled on a piece of paper. If you are audited, the IRS will trace each receipt to its point of origin.
In this event, the charity must corroborate your donation. Your receipt must contain the date, the name of the charity, and the amount that you donated at the very least.
Know the Limits
There are a number of scenarios where you can deduct a total of 20%, 30%, or 50% of your maximum income. What you can claim depends on what you are donating and the organization you are donating to. Thankfully, this doesn’t apply to most of us, but if you’re donating 20% or more of your annual income you should look up these limits.
Image credit: Mike Mozart