‘Tis the season for tax deductible donations. While many people donate out of the goodness of their hearts and not because they expect anything in return, there’s nothing wrong with knowing and taking advantage of the tax deductions involved in charitable giving.
Whether you’re an individual or run a business, it’s important to know that not all deductions are treated equally. Working with a qualified CPA will ensure that you know how to properly handle charitable donations, as the rules can be quite complex.
Charitable Donations: The Why, What, And When
Charitable giving helps those in need or supports worthy causes. It can greatly help the lives of those in need, as well as carrying out your core values. Doing so not only makes you feel good, improves your reputation, and builds connections, but can also lower your taxable income. These donations are gifts, money, or goods given to a tax-exempt organization that can reduce your taxable income.
The end of the year, December 31st, is the cut off date in order to be able to claim the deduction when filing your tax return, which is why charities and consumers alike make a push for more charitable giving at this time.
Charitable Donations For Business Owners
Typically, C corporations are the only business structure that can take deductions when donating to charity. If you have an S corporation, an LLC, or another pass-through business, you would need a Schedule A, so ultimately, it would not matter whether the donation comes from you or your business.
Services donated are not deductible, however expenses incurred through providing those services are. Certain types of donations are not deductible, such as political donations and donations to non-qualified organizations. Obtaining the professional help of a CPA helps you navigate all the complications involved in charitable donations so that you can take the deduction.
When Are Charitable Contributions Tax Deductible?
It’s important to note that just because you donate doesn’t mean your donation is tax deductible. Many givers don’t realize that donating to crowdfunding platforms doesn’t always result in a tax break. Gifts to friends and family or a stranger on the Internet are not tax-deductible. Transferring a property while receiving nothing or less than the full value in return may result in gift tax.
You must donate to a qualifying tax-exempt organization as defined in section 501(c)(3) of the Internal Revenue Code and receive nothing in return for your contribution. Before donating, ask how much of your donation will be tax-deductible. Depending on the type of contribution and the organization, the amount you can deduct ranges.
This limit applies to all donations made throughout the year. Contributions that exceed the limit may be able to be deducted on tax returns in following years through the carryover process.
Claiming Charitable Contribution Deductions On Your Tax Return
In order to claim tax-deductible donations, you must itemize your taxes. This means filling out a Schedule A along with the rest of your return. You may need to fill out additional forms, depending on the types of donations you made. Working with a CPA will help you ensure that everything is filled out correctly and accurately.
You’ll want to ensure that you:
- Donated to qualifying organizations.
- Documented your charitable contributions. Documentation needed varies depending on the type and amount. For example, the IRS requires a written letter of acknowledgement from the charity for donations worth more than $250.
- Kept the deadline in mind. If you date a check for before December 31st, but you don’t mail the check until after the new year, you wouldn’t be able to claim this, as the IRS determines delivery date for checks as the day it was mailed.
Maximizing Your Tax Deductions For Charitable Donations
Golub, Senitt, Rosenberg & Co. is here to help you with all of your accounting needs. We partner with you rather than just providing you with a service. We focus on timeliness, responsiveness, and building long-term relationships with our clients. This enables us to fully comprehend our clients’ needs so that we can provide you with the precise service you require.
For professional, timely, accurate work, contact our office today and let us show you the difference having capable CPAs on your side can make in your finances.
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