Americans donated more than $316 billion to charity last year, according to a recent Forbes article, and most of those donations came from individuals. Holidays are the time when most people do their charitable giving, and it’s also the time when people start thinking about year-end tax planning.
Forbes provided 10 tips for getting the most out of your charitable giving this year:
1. Don’t forget to itemize. The IRS requires that you itemize your charitable deductions each year on your 1040, so be sure to keep accurate records.
2. Get a receipt. If you are giving personal property, like household goods or clothing, be sure to get a written receipt that lists the items you have donated. If you are giving cash, you can use a receipt from the organization or a cancelled check or credit card receipt that includes the name of the charity.
3. Choose wisely. Not every charity is recognized by the IRS as an exempt organization. You can check by name at the IRS Exempt Organizations Select Check website.
4. Include payroll deductions. If you have a payroll deduction for charitable purposes, your employer should furnish you with a record of your annual deduction.
5. Deduct the value of incentives. If you receive something in exchange for your donation – even a coffee mug or a t-shirt – you are required to deduct the value of that item from the value of your donation.
6. Consider donating appreciated assets. You can get a double benefit when you donate an appreciated asset like stock or real estate. If you have owned the asset for at least one year, you may deduct the fair market value and avoid paying the capital gains tax on that asset.
7. Know what you can deduct. If you donate your services to a charitable organization, you can deduct things like mileage or supplies, but you cannot deduct the value of your time.
8. Document gift value. Non-cash items need to be documented in terms of their condition when determining fair market value. If your donation is worth more than $500, the IRS requires a written appraisal for the fair market value of that donation.
9. Watch out for limits. Many people do not realize that there are limits on charitable contributions, which are tied to your adjusted gross income (AGI). If you give more than 20 percent of your AGI, then you may encounter these limits, which vary according to the gift type (cash, non-cash items, appreciated assets).
10. Give by December 31st. You will only receive deductions for those items or cash you give during the calendar year, so be sure you make your donations before New Years. If you are giving a gift by check or credit card, you will get the deduction for this year so long as it is recorded by Dec. 31 – even if you don’t pay the credit card or the check isn’t cashed until next year.
If you would like more information about charitable planning or protecting your assets, call our office at (612) 206-3701 or fill out our contact form today to schedule a time for us to sit down and talk.
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