Before you know it, tax time will be upon us! The holidays cause time to slip through our fingers and before we know it, we are ringing in the New Year. Before that happens, it is wise financially to examine how you can ease your tax burden. This may include making year-end contributions to maximize the benefit.
- Donate used clothing and household items
Consider switching up “spring cleaning” to December. Your gifts of used clothing and household items can help families in need but also provide you with tax benefits. It is important to select charities of the proper designation and to get a receipt. For items you are donating over $500 it is wise to have a qualified appraisal in hand.
Larger donations may include antiques, designer clothing or accessories, furniture, electronics and artwork. Many charities hold silent auctions to raise money and your unused or unwanted large ticket items may be of great interest to them. However, remember if you need the tax benefit now, you have to make the donation during this calendar year. While some charities may ask you to hold the item until closer to an event, press forward with a charity that will provide you with a receipt and take the item off your hands now. If non cash contributions exceed $500, you will have to include a completed Form 8283 with your tax return.
- Monetary donations to your favorite charitable cause
Monetary donations are always appreciated this time of year. Nonprofit organizations have income to meet just like us. Over the holidays, many nonprofits are seeking donations to provide food, toys, and clothing throughout the holidays. There are even organizations that take donations to help individuals pay their heating bills throughout the winter. The IRS requires that charitable monetary donations be verifiable through a bank record (credit card, cancelled check or statement) or written receipt for the donation.
- Itemized deductions
It is important to note that you have to itemize your deductions on Form 1040, Schedule A through the IRS to receive a tax benefit for your donation. Individuals that use the 1040A or 1040EZ are not eligible to receive additional deductions for charitable giving.
- Donate a vehicle
If you have a car, boat or airplane you would like to donate to charity, remember the deduction is typically limited to the gross proceeds from its sale. This can present a challenge for year-end giving. It may behoove you to save that donation until the following year to ensure you receive maximum tax benefit for the donation. Have a discussion with your tax accountant to determine the best time to make a donation of this size. You will have to provide Form 1098-C with your tax return.
You can quickly check the exempt status of a charity you are considering donating to through Exempt Organizations Select Check Tool provided by the Internal Revenue Service. Remember, for all donations you make this year, get a receipt that includes the name of the charity, date of your contribution and a description of the item donated.
