For Mark Roberts’ Use: At this time of year, many of us start to think about giving money to charitable organizations. Perhaps you prefer a charity that provides toys to less fortunate children, or a shelter that helps the hungry and homeless enjoy a holiday meal. Whatever you prefer, it’s a smart move to make sure you can utilize your gifts as a deduction on your federal income tax return.
The first step to ensuring your donations are tax deductible is to make sure your chosen charity is genuine. Unfortunately, there are people who take advantage of others’ generosity by setting up fake charities that closely resemble real ones. Before answering that email or phone call with a generous donation, check the IRS website (www.irs.gov). If the organization is verified as real, still remember to use a credit or debit card to make your donation. Never give cash, as it is untraceable and impossible to verify that it ended up in the correct hands.
Next, save all receipts for your donations. The charity will need to specify the amount of your gift clearly on the receipt. Remember that if you receive any sort of gift in return, you can only deduct the amount of your donation that is in excess of the fair market value of the gift you have received. If you do receive any type of token gift from the charity, that will need to be stated on the receipt as well.
Remember that there are limits on charitable deductions. Generally, the limit for cash donations is 50 percent of your adjusted gross income for the year. Certain other types of donations are limited to 20 or 30 percent, so be sure to do your research on deductions if you choose to donate something other than cash.
Aside from being a great income tax deduction for 2013, any amount that goes over your allowable deductions can be utilized on future tax returns for five years. This may allow you to plan for greater personal benefit from your charitable donations. If your income is expected to be much higher next year, it might be worth your while to save your deductions rather than claim them on your taxes this spring. Always talk to your tax professional about deductions so that you can time them for maximum benefit to you.