No matter the season, there are a few things you’ll want to remember when it comes to making charitable donations. Have you given to charity this year? We have some suggestions for corralling your gifting records and getting a jump start on preparing your taxes.
Keep Detailed Documentation
If you’ve given cash to a charitable organization, be sure to set up an easily accessible file to keep all receipts and documentation handy that you have received throughout the year. Always keep a receipt for your gifts, such as a canceled check image, credit card statement, or email confirmation. According to IRS.gov, even if you are a non-itemizer, you are eligible for a limited deduction for a cash contribution of up to $300 for individual filers or up to $600 for married individuals filing joint returns for the 2021 tax year.
If you give a gift over $250 to a qualified 501c3 charity, you should expect to receive a letter of acknowledgment. This letter contains an allocation of your amount given reduced by benefits you received such as a meal or thank you gift. Only a portion of the contribution is tax deductible. DMM Tips: Today, create an email tag for online acknowledgments to make locating them easier come tax time. Paperless-tip: Print your confirmation email into a PDF and file with your cloud-based paperless records.
If you are donating items such as clothing, furniture, or household goods, remember to save any receipts or documentation you receive for these donations. Create a detailed list (including quantity, condition, and description) of the items you donate to compute the deductible value. Tax tip – if you’re in a hurry, take photos of your donated items and create your list at your leisure. A useful tool is ItsDeductible.com to find the value of the donated items. The value of your donation is not your purchase price, rather it’s the “fair market value” which is the price that would be agreed on between a willing buyer and a willing seller in a transaction.
If you serve on the Board of Directors for a non-profit organization, track all your costs, miles driven for volunteer efforts, travel expenses, or giving an in-kind gift, such as providing items for a charity auction to your favorite organization.
Make sure to keep all your documentation, receipts, and itemized lists for these gifts as well for your tax preparer. Your CPA will need to know what is and isn’t acceptable for a deduction on your taxes.
If you hold an IRA account and are over the age of 70, a donation of up to $100,000 to a charitable organization directly from your IRA will not be qualified as a taxable distribution. IRA’s do have rules for donations, and you’ll want to make sure your charity has the proper 501(c)(3) designation prior to gifting. This type of donation is made directly from your IRA account to the organization. Again, keep records of all your giving showing your basis, the appreciated value, and acknowledgment letter from the receiving charitable organization.
Finding a Qualified Organization
How do you find a qualified organization for your donations? You’ll want to look for their 501(c)() designation in order for them to be considered “qualified.” A handy online tool to find various charities would be CharityNavigator.com. This website can help you find the charity that fits your ideals and giving needs.
Documentation is Key
There is no such thing as keeping too many records, especially when it comes to doing your taxes. The key takeaway for charitable donations is to keep detailed and complete records so that you’re not pulling out your hair come tax filing season. It will also help you to keep track of the donations you’ve already made throughout the year. Keep a close eye on your mailbox in January, as many organizations send out year-end giving summaries. When you give contributions monthly or even quarterly, you’ll find your documentation summaries for these organizations all on one page.
At Organized Instincts, our qualified team of daily money managers can help you organize and manage your annual gifts easier. Schedule a consultation today and give yourself the freedom to joyfully continue donating to the causes you care about.