Tis the Season for Charitable Giving? Understanding the Tax Rules & Benefits of Year End Giving

There are fifteen days left to give the best gift this year.  Wait…you say, Christmas is in four days.  No, you have fifteen days, until 11:59 P.M. on December 31, left to make a charitable gift and enjoy the benefits of that gift.  In a season dedicated to consumerism, and giving the best gift possible, giving to charities and those who need it is often overlooked.

Charitable giving can be the best gift – you can give to help your community AND you can receive many benefits.  The first benefit that most think of when charitable giving is the tax advantages of giving.  For individuals who itemize their deductions, charitable giving increases the amount of itemized deductions.

In 2012, the threshold to itemize deductions is $5,800 for an individual, and $11,600 for married couples filing jointly.  The amounts aggregated to determine your itemized deductions are generally mortgage interest, real estate ad valorem taxes, state income taxes, medical expenses in excess of a base amount, and charitable giving.

5 Rules to Follow to Claim your Charitable Deduction:

In order to claim your charitable deduction, a few rules must be followed.

1. The easiest rule is that your charitable deductions cannot exceed more than 50% of your “adjusted gross income” as calculated on your tax return.

2. The organization to which you make your contribution must generally be a 501(c)(3) organization as designated by the Internal Revenue Service.

3. You need to have documentation for your donation, whether it be cash or in-kind donations.  If the donation is cash, written documentation of the donation must exist.  If the donation is in excess of $250.00, the charity must provide written acknowledgment of the donation.  If the donation is less than $250, a simple receipt from the charity, a cancelled check or credit card receipt is appropriate evidence of the donation.

4. If the donation is an in-kind donation, a receipt is required from the charity and the goods must be in good condition.

5. If the value of the non-cash items is in excess of $500, you must file an IRS Form 8283 with your tax return.

Regardless of the tax benefits, other reasons exist to give charitable donations.  A charitable donation helps make our communities better places to live, providing services or improved lives to people who might otherwise not have access to them. Making a donation to help others, will give you that “feel good sensation” – you see what your generosity does to help others and, in return, it will make you feel better.

Whether you donation be large or small, just give and see what is returned to you.

**This post was written by Tanya Bower, Director, Tripp Scott