For Mark Roberts’ Use: It’s that time of year once again! We’re all quite busy with shopping, planning parties, and maybe even traveling, but you should also be taking a few moments to wrap up this year’s financial planning by December 31. In particular, all charitable donations must be made by the end of the year, if you hope to claim them as valuable tax deductions.
Some people believe that they can simply list all charitable donations from the prior year, and claim a tax deduction. However, there are actually some pretty strict rules regarding this tax deduction, and if you fail to follow them correctly, you might end up owing the IRS money if you’re ever audited.
Check to be sure the charity is legitimate. Before pulling out your credit card, it pays to make sure that a charitable organization is even real. Your charity of choice must be qualified by the IRS, and unfortunately many fake charities pop up this time of year to take advantage of the giving spirit. Not only could you give money to a con artist instead of needy children, for example, but you also can’t claim these “gifts” as a deduction on your tax return.
Keep accurate records. If you’re ever audited, and cannot produce a record of your donations, you could lose the deduction and owe the IRS money. Keep receipts for all non-cash donations such as household goods that you donate to charity. If you make payments by credit or debit card, your statements will suffice as proof.
Claim the correct amount. Cash donations are easy enough to count, but the rules regarding household goods can get a little murky. You can only claim their fair market value, not the price you originally paid for the items. Of course, occasionally an item might appreciate in value over the years (such as antiques), so it is sometimes possible that you can claim a value higher than the original price of the item.
Remember, you must make charitable donations by December 31, in order to claim them as tax deductions in the spring. If you find yourself waiting until the last minute each year, or struggling to keep records, there is a convenient way to streamline the process. Simple establish regular payments via credit or debit card to the organization(s) of your choice. You can fulfill your annual charitable donations budget for the year, and your card statements provide easy proof of your deductions.
For more information on financial planning, give us a call. We will be happy to answer your questions.