How to Make Charitable Giving Count on Your Taxes

How to Make Charitable Giving Count on Your Taxes

Americans gave roughly $385 billion to nonprofit organizations last year, which according to the National Philanthropic Trust, is a 4.2% increase from 2015.  Donating to your favorite nonprofit can provide a lot of benefits from providing a way for your nonprofit to give a hand up to those it serves, to giving you great potential tax deductions at the end of the year.

 

We’ll walk you through what classifies an organization as a nonprofit and what you can claim on your taxes.

 

So, what classifies an organization as a nonprofit?

A nonprofit organization is a tax-exempt status business recognized by the Internal Revenue Service (IRS), and is formed for the purpose of serving a public or mutual benefit.  There are more than 1.4 million nonprofit organizations registered with the IRS. 

 

A nonprofit must be registered properly with the IRS in order to claim your donation on your taxes at the end of the year.  See if your preferred nonprofit is registered with the IRS.



What can I donate in order to be eligible for claiming my gift as a tax deduction?

number one in blue box  Monetary Gift—You can claim a monetary donation to any qualified nonprofit organization, but you must have written acknowledgement of your contribution.  Always ask for a receipt when making a monetary donation if it’s not provided. 

A great way to save for end-of-year gifting is by opening a holiday savings account.  You can make deposits automatically deducted from your paycheck or another American Eagle Credit Union account.

number two in blue box  Assets—Assets, such as stocks that you’ve owned for more than a year, can benefit your favorite nonprofit organization. You can avoid any capital gains tax on the donated asset’s appreciation.


number three in blue box  Goods
—Donating items with substantial value (furnishings, home goods, clothes, appliances, etc.) need to be recorded and itemized. If your item is valued over $500, you should receive a letter confirming the donation from the nonprofit organization.  If you’re self-documenting because the donation is less than $500, be specific with noting the description and condition of the items at fair market value/resale value.

If you donate property worth more than $5,000 you must obtain a written appraisal of its fair market value.  Non-cash contributions may be required to fill out a form 8283.


number four in blue box  Out of Pocket Charitable Expenses
—Cost of transportation, travel expenses, uniforms, and/or supplies used in the performance of your services for volunteering can also be listed on your tax deductions. Make sure to keep receipts and records for every deduction taken.

 

For more information on financial planning, visit our Resources Center.  Questions about opening a holiday savings account to help plan for end-of-year gift-giving? Contact us online or reach our Contact Center at 1-877-325-2848.

 


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