Potential Tax Benefits of Charitable Giving

kevin rigg | director of financial life planning


We believe the primary motivation to donate to charity should be altruism, but it is important you are also aware that there many tax benefits available. Below, I discuss several important rules and planning strategies you should know about related to the tax deduction for charitable giving.

A charitable gift may entitle you to a charitable contribution deduction against your income if you itemize deductions. You only itemize if total deductions are greater than the standard deduction (which is now more difficult now that the 2017 tax law nearly doubled the standard deduction to $12,200 for singles and $24,400 for couples).

A contribution is deductible in the year in which it is paid. Putting the check in the mail to the charity constitutes payment. A contribution made on a credit card is deductible in the year it is charged to your credit card, even if payment to the credit card company is made in a later year.

Contributions can only be deducted if they are made to or for the use of a qualified charitable organization. If you are not sure the charity you are donating to is qualified, use this search tool on the IRS web site to find out - https://bit.ly/2wo0M3u.

There are limits to how much you can deduct, but they're very high. Under the new tax law, a deduction for most donations to a public charity is limited to 60% of your adjusted gross income.

Maintain proper documentation of your contributions. If you want to claim a charitable deduction for a cash gift, then you must be prepared to verify your claim. If you are audited, the IRS will only accept one of the following to substantiate a monetary gift: a canceled check, credit card statement, bank statement or a written acknowledgment from the charity.

Rules exist for non-cash donations. In most cases, you simply need a receipt from the receiving organization with the date and item(s) given, although the IRS requires a qualified appraisal if you donate any single item worth more than $500. Also, be sure to follow the IRS rules when valuing a donated vehicle, as they continue to take a close look at such deductions.