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Understanding the Deduction for Charitable Donations

When you make a donation to a charity in the United States, it is often tax deductible. Helping organizations that depend upon generous donations to continue their good work can make you feel good. However, the fact that you can lower your tax bill by donating to charity even makes it worthwhile financially.

Charity Donations are Tax Deductible

charitable donation

Charitable donations can benefit you twice: feels good and provides a tax break

If you want to claim tax deductions on any charitable donations that you make, you will have to fill out Form 1040, Schedule A. However, it’s important to remember that there are a number of rules that you should be aware of before you try to claim tax deductions for charitable giving.

The first thing to be aware of is that pledges are not included. You have to actually make your donation before you are able to claim tax on it, and if you just pledge to make a donation this does not count.

You must also be donating to an organization that is tax exempt. This means that they have to have a 501(c)(3) status, although churches and religious organizations do not have to get this status from the IRS to be tax exempt. If in doubt, always check before making a donation.

Your donations are not tax deductible if you give to certain groups, including:

  • political parties
  • individuals
  • labor unions
  • foreign governments

Also, you have to be able to itemize your deductions in order to claim them. If you cannot itemize your deductions, then you will not be able to make a claim.

Keeping Records of Your Donations

You must also keep records of any donations that you make to a charity over the course of the tax year in order to claim back the tax. Records can consist of a range of things, but in general they include a record of any contributions that you make, including:

  • bank statements
  • cancelled checks
  • written statements from the charity to which you made the donation
  • letters
  • appraisals for any property you donate

Records should clearly show the name of the organization, the date you made the donation and the amount that you donated. Also, if you make a donation larger than $500 then you must complete Form 8283 and attach it to your tax return.

When to Reclaim Tax

You should reclaim the tax in the same year that you make the donation to charity in most cases. If you make a donation at the end of the tax year by check or credit card then you can claim the deductible in the same year, even if the charity does not actually charge you until the following tax year.

Claim Back the Tax on Your Donations

If you want to make charitable donations then being able to deduct the tax is very useful. This encourages generous giving to charity, and can make it very worthwhile for you. Just make sure that you are aware of the information regarding tax deductions for charitable giving, and contact a professional for advice if you need more information on what you can deduct.

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