This is the season of giving, and there is no better time to help your favorite nonprofits successfully leap into the New Year. Tax deductions on your charitable contribution, can pave the way to a happier January for you as well! Check out these charitable giving FAQs from Raccoon Valley Bank to help you make the most of your generosity.
Where does my gift need to go to make it tax deductible?
Score a deduction by itemizing and filing a 1040 form when you donate to a qualified organization. Nonprofit organizations like religious groups, public government causes, nonprofit schools and hospitals, public parks and recreation areas, and war veterans’ groups fall under the qualified category, whereas for-profit entities, individuals, or political candidates for public office, don’t make the cut.
What’s with itemizing?
There are two types of deductions, standard and itemized. Standard is a fixed amount that reduces the income you’re taxed based on your filing status and age. Itemized lets you list your deductions on a schedule, which includes filings like property taxes and charitable donations. If you claim standard instead of itemized on gifts, you may not receive the deduction you deserve.
How much can I deduct from charitable donations?
If your cash benefits a public organization, deduct up to 50 percent from that year’s Adjusted Gross Income (AGI). That means that a $25,000 donation from your $40,000 AGI will only let you claim $20,000 on your charitable gift in the year that you give it. You can, however, roll over that extra $5,000 up to five years after donating. For contributions to private donations like the Bill & Melinda Gates Foundations, use the same rules but swap 50 percent with 30.
I donated “stuff”, not cash. Does that count?
Yep! Household goods (clothing, furniture, certain appliances, etc.) and other personal property can be claimed based on fair market value. However, it must be in good or better shape that when it was first purchased for the IRS to count it as a deduction. Regardless of the item, keep track of receipts from your donated items, which is especially required for donations of more than $250.
Still have questions about how your giving and your taxes interact? Our financial advisors would love to lend a hand. Give us a call today – and have a happy holidays!
Raccoon Valley Bank, Equal Housing Lender, Member FDIC