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Hand dropping money in another handAmericans are giving over $335 billion in charitable contributions each year. And the U.S. government, being a big softie for philanthropists, allows citizens to deduct these expenditures from their taxes – all the way up to 50% of their adjusted gross income. But with all the generous giving we do, keeping track of these deductions can be confusing, especially when you’re contributing cash or non-cash items to charity. For instance, how do you record your donations to Goodwill or the Salvation Army? And what about the cookies you bought at that Christmas bake sale for charity? Is that donation good for a tax deduction as well? Let’s take a look at the different kinds of charitable donations that are up for grabs, as well as the best ways to keep an acceptable record of them. After all, you’ve spent the whole year giving back. You should make sure your government is doing the same for you.

Which Organizations Qualify?

Before you buy scratcher tickets in support of the neighbor kid’s “educational” trip to Puerto Rico, you should consider how the government defines a qualified charity. There are a few hoops each charitable organization needs to jump through before Uncle Sam gives it the stamp of approval.

Charities are judged by their organizational structure and mission statement, which must be solely intended “for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.” There are also a few organizations that “foster national or international amateur sport” that qualify as well.

If the group you’re giving to meets this initial prerequisite, then it also must be registered with the IRS. For example, religious and charitable organizations will need to be filed as a 501(c)(3) organization, which is the most common. A few other groups, like some veterans’ organizations and firefighters, will need to be filed as 501(c)(4) groups. To view a full list of government-approved charitable organizations, take a look at the Exempt Organizations Select Check provided by the IRS.

While these requirements may seem reasonable at a first glance, they don’t cover certain fundraisers. For instance, if your office is having a raffle to support a financially struggling family in your community, and you’re giving the money directly to the family, you probably won’t be able to deduct that donation from your taxes. In most cases, neither your office fundraiser nor the family you’re donating to will be considered a charitable organization. One way to circumvent this is to have an approved charitable organization, such as the Red Cross, sponsor your event. By doing this, you’re donating to a 501(c)(3) group, which is then giving contributions to the family.

What You Can and Can’t Deduct

Political Donations

Keep your presidential buttons to yourself: Donations to political organizations, individuals and political candidates aren’t tax deductible.

Charitable Expenditures

The U.S. government knows that your time is just as valuable as cash and non-cash donations, so you’re allowed to deduct the costs incurred while you’re working for a charity. This includes the mileage you rack up while volunteering for charitable organizations, which is currently valued at $.14 per mile. It also includes expenditures from your own pocket, like art materials for hand-drawn signs or ingredients for a bake sale. Remember though, these expenses will only be deductible if you’re giving them to a qualified charitable organization.

Gifts Received from Charities

When you receive something in return for contributing to a charitable organization, you can only deduct the amount that exceeds the fair market value of the benefits you received. For example, if you attend a charity dinner in support of your local Humane Society, and you pay $100 a ticket, you must subtract the cost of your meal from your donation. So if your plate – which probably consists of hotdogs, hushpuppies and catfish – costs $25, you can only make a $75 deduction.

Sadly, it’s because of this reasoning that Girl Scout Cookies are not tax deductible. According to the official Girl Scout FAQ page, “You’ve purchased a product at a fair market value. For this reason, no part of the price of a package of Girl Scout Cookies used in this way is tax-deductible.” In layman’s terms, that box of thin mints probably won’t be saving you any mint this tax season. That being said, if you buy Girl Scout Cookies and then donate them to a qualified charitable organization (your stomach doesn’t count), then they will be considered tax deductible.

Deducting Monetary and Non-Cash Donations

Cash vs. Check

During the course of the year, you probably made a few cash donations to one charitable organization or another. For future reference, try not to do this. Whenever the option exists, make monetary donations with checks or debit/credit cards. If and when the IRS comes knocking, it’s nice to have an easily accessible paper trail on hand.

But there are some situations when cash is your only option, meaning you have to find a different way to prove the validity of your donation. According to G.E. Miller, a contributor for 20somethingfinance, you should have a bank record or receipt “that shows the name of the organization, the date of the donation, and the amount.” If your contribution to a single charitable organization is over $250 (in cash), you also need a “written acknowledgement from the recipient of your donation” that corroborates with the amount you’re trying to deduct.

Non-Cash Donations

Other types of donations, like baby clothes, dining room furniture and nonperishable food items, are all lumped into this non-cash donation category. Like cash donations, you’ll need to have documentation for these items. You’ll also need to have the fair market value, which enables you to put a price on non-cash items. Goodwill helps make this process easier with their Donation Receipt Builder.

As in the case of cash donations, non-cash contributions that are over $250 (and under $500) need to have the acknowledgement from the charitable organization. Contributions that are over $500 (and under $5,000), must have acknowledgement from the organization, as well as an explanation of how you came to purchase the property, the date you began owning it, and the cost of the property. And contributions that are over $5,000 have the same requirements as the lower amounts, but these deductions must also have a written appraisal from a qualified appraiser. These larger donations can be a little tricky, so do your research before giving your car to NPR or burning your house down for the fire department.

Keeping Track of Donations

As you can probably imagine, donating cash or non-cash items to charity requires a little bit of organization on your part, but luckily, there are some online programs that can help you through this process. TurboTax offers ItsDeductible, a free tax deduction tracking software “that values noncash donations to charity using a combination of auction web sites (including eBay), resale outlets and thrift stores.” For example, if you’re donating a blender, you will enter basic information about the appliance into the program, and ItsDeductible will compare your blender to similar blenders on eBay and tell you what is considered a fair value. After that, it organizes your donations and even suggests the amount you’ll receive in deductions. This is an easy, stress-free way to stay organized.

Pat Yourself on the Back

It’s been a busy year for you. You were pulled in a hundred directions with work and with your family, and yet you still found time to give back to the causes that are near and dear to your heart. So much good has been done through these charitable contributions, and now it’s time for the government to turn around and give something back. You’re trying to make your neighborhood, or your community, or your world a better place. These deductions are just a nice perk, like icing on top of the cake. So dive into your receipts, pick through your bank statements and track your philanthropic activities during the previous year.

This Post Has One Comment

  1. My wife and I were surprised to learn that when she donates her paintings (she’s an artist) to a charity, she can not claim fair market value of the painting as a deduction. She can only deduct the cost of the materials used in the painting – depending upon what materials she used. This may amount to $50 to $125.

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