Tax season is upon us, which means that you are likely taking an inventory of not only your income for the past year but also any charitable contributions that may be tax deductible. The world of charitable contributions can become very confusing, however, especially when considering circumstances involving partial compensation or potentially unqualified organizations. So how do you know which charitable contributions to claim for your own tax purposes? Read on for a brief guide to these tax deductions.
What You Can Count
Donations to qualified organizations
Generally, a qualified organization falls under the category of religious, charitable, or educational, or it could be a war veterans’ organization or fraternal society operating under the lodge system. When in doubt, always ask the organization you are donating money or gifts too if their donations are tax deductible. If an organization’s charitable contributions truly are tax-deductible, the organization should be able to provide you with a letter from the IRS stating so. Another option at your disposal is to search the IRS’s Exempt Organizations Select Check, which is a list of organizations eligible to receive tax-deductible charitable contributions.
Donations can be monetary or involve some sort of physical good. In the case of physical goods, you need to assign the fair market value to them, and they must be in good condition at the time of donation. This is when documentation of your donations, such as the tax receipt given to you when donating at an organization for the homeless, is especially important.
While you can’t make a charitable deduction for time spent volunteering, you can include certain expenses associated with that volunteering, including transportation expenses and out-of-pocket expenses not reimbursed to you by the charitable organization.
What You Can’t Count
Did you receive something like event tickets or merchandise in exchange for your donation? If you received something in return, then this isn’t a tax-deductible contribution. There is, however, some wiggle room here. For example, if you paid $100 for a sit-down meal valued at $30 at a charitable event, you can deduct the difference of $70 as a charitable contribution.
Contributions to individuals
When you donate money or goods to a particular individual or family, this does not qualify as a charitable contribution, either. This includes online fundraising campaigns for individuals.
To the dismay of many who choose to participate in the political process in a monetary way, contributions to political campaigns are not tax-deductible.