There are many reasons to give to charity. The first, of course, is to lend your support to a cause you believe in. But many people don't realize that giving to charity is a win-win situation at tax time.
Many people take the standard deduction on their 1040s. The current standard deduction parameters allow $11,900 for couples filing jointly or $5,950 for individuals. If your tax deductible spending is higher than allowed under the standard deduction, it's a good idea to fill out Schedule A and itemize further deductions. This is where those donations to charity may put cash back in your pocket.
Before you give, you may want to find out if your charity of choice is a qualified charitable organization. This means that the charity has registered with the government and has been designated a 501(c)(3) organization. If so, you can deduct your donations. Some smaller charities, such as individual churches may not be required to file for 501(c)(3) status but donations to them may also be tax deductible.
Donations to individuals, political campaigns and foreign charities don't generally fall under the umbrella of qualified organizations. If you are unsure about a group's status, search the IRS website to find out if they're qualified.
In order to claim charitable deductions on your tax return, you'll need to have receipts from the charity on hand, noting the date and dollar amount of each donation. Canceled checks or credit card statements verify your claims as well. In the event that you have donated goods to the charity, such as gently used clothing, books or household goods, you'll have to generate a fair market value for the items donated and have your figure validated by the charity. If the total value of your non-cash contributions is greater than $500, be prepared to file a Form 8283 along with your 1040 and Schedule A.
While you don't have to mail in your receipts with your tax return, be careful to maintain them with your records. In the event of an audit, these receipts will be critical in proving that your deductions are valid.
Schedule A of the IRS Form 1040 is fairly user-friendly. Lines 16 through 19 apply to those who give to charity. You will enter your cash contributions, non-cash contributions, any carryover you may have from a prior year (a less common situation) and the sum of your charitable deductions. This amount will be tallied on the Schedule A, along with other deductions you are entitled to, and deducted from your gross income before your tax is calculated.
Lending your support to a cause you believe in and saving at tax time...talk about a win-win situation!