Many people get into the spirit of giving during the holiday season and make donations to various organizations and causes at this time of year. While acts of charity are their own reward, it doesn’t hurt to get a tax deduction for your donations as well. But how can you ensure that your holiday donations are tax deductible? Here are a few things you should do.
CHECK THE ORGANIZATION’S TAX EXEMPTION STATUS
In order for your donations to be tax deductible, they must be made to a registered non-profit organization. You can check the tax exemption status of any organization you donate to on the IRS Tax Exempt Organization Registry. You can easily view this public registry on the IRS’s website and search for the specific organization you plan to donate to. If the cause you want to support is not registered as a tax-exempt organization, then your donation will not be tax deductible.
One common mistake that people make is attempting to deduct donations to private fundraisers like GoFundMe campaigns. Because these are personal causes and not registered organizations, you cannot deduct any contributions you make to these campaigns on your tax return.
Donating only to registered tax-exempt organizations not only ensures that your contributions are tax deductible, but it can also protect you from falling prey to charity scams. Many scammers set up fake causes at this time of year, attempting to take advantage of people’s giving spirit around the holidays. While there are plenty of genuine causes out there that aren’t registered tax-exempt organizations, the best way to ensure that you don’t give your money away to a fake cause is to ensure you only donate to tax-exempt charities.
ENSURE YOU’RE DONATING THE RIGHT THINGS
Knowing what donations can be deducted on your tax return seems quite simple; however, there are a few common mistakes that people make. One of the most frequent items people attempt to deduct as a charitable donation, but which is not actually deductible, is their time. Donating your time to a good cause is a great way to give back, but you cannot deduct the value of your time on your tax return. This is true even if you’re volunteering your time in a professional capacity.
For example, if you’re a childcare professional, and you volunteer by providing free childcare to women who are in a shelter during the holidays, you cannot deduct the time you spend providing that childcare. You can, however, deduct any money spent on snacks, toys, and gifts for the children, if you should purchase those items.
All goods with a clear, measurable value—including clothing, toys, stocks, real estate, and more—are deductible on your tax return, as are cash donations. If you’re ever uncertain about the tax deductibility of your donations, reach out to our tax experts in Provo for help.
KEEP DETAILED RECORDS
Finally, you should ensure that you’re keeping detailed records of all your donations. If you do not have receipts or other documentation of your charitable donations, then those donations are not tax deductible. Should you claim undocumented donations on your tax return and are audited by the IRS, those donations will be removed from your return, and the amount you owe will increase accordingly.
Most verified charities will gladly provide you with a receipt or some other written record of any cash or good donations you make. Keep copies of these with your records, and provide them to your CPA when preparing your tax return.
If you have questions about deducting your donations this holiday season or need help maintaining and organizing your records for tax filing purposes, contact The Accounting Guys to speak with one of our tax experts in Provo. We’ll help you ensure that your donations are tax deductible, and that your records accurately reflect your charitable gifts.