Deductions

A Complete Guide to Deducting Charitable Contributions

A Complete Guide to Deducting Charitable Contributions

One of the best ways to help make our communities a better place involves supporting the charities and other organizations dedicated to causes we care about. Some people choose to do this by volunteering their time to help with things like local events, while others prefer to make a financial contribution. Those who fall into the latter category therefore become qualified for a charitable contribution tax deduction, saving them a bit of money when income tax season rolls around yet again.

However, a charity tax deduction is not simply the equivalent to however much money you gave to the organization in question. If you truly want to make sure this process goes smoothly, there are a few key points to keep in mind.

Donation-check-GettyImages-944809242-2500
Credit: Getty Images

Charitable Contribution Tax Deductions: An Overview

The most important part of this process to understand is that you can't just donate to any charity and expect to claim it as a deduction when you file your income taxes. You must be dealing with what is considered to be an official "qualified organization."

To rise to that level, any charity that you're thinking of contributing to will need to meet the following criteria:

The charitable organization must have been created in the United States or in the District of Columbia.

If it isn't a chest, a corporation, a trust, a fund, or a foundation, it can also be a church, a synagogue, or any other type of religious organization.

Organizations dedicated to helping war veterans that are managed in the United States also qualify.

Non-profit volunteer fire companies fall under this category.

It can also be a civil defense organization that was created under federal, state, or local law.

With regard to the timing of any contributions you make, understand that simply pledging a donation is not enough to get a deduction. Any contribution that you make - be it in cash or something else - but needs to be paid prior to the close of the tax year in order to be deductible. This is true whether you use the cash-based method of calculating the deduction or the accrual method.

donate-GettyImages-1045747002-2500
Credit: Getty Images

Additional Considerations About Charitable Contributions

It's equally important to note that your charitable contributions don't have to be limited to strictly money. Many people choose to donate property other than cash. So long as the organization in question is one of those on the above list, everything will be okay.

Having said that, if you're going to donate property, understand that you can deduct the fair market value of the property. If that property has ended up appreciating in value over time, you may have to make some adjustments moving forward.

Finally, understand that just because rules and protections that were put in place due to the COVID-19 pandemic are currently expiring doesn't mean that you can't still take advantage of them as far as charitable contributions are concerned.

Over the last few years, the IRS actually made a temporary suspension on limits regarding charitable contributions. So long as you made a cash contribution to a qualifying organization during the calendar year 2020, you can still take advantage of that - assuming that you have not already filed your taxes for that year. Note that contributions of non-cash property do not actually qualify for this type of relief. All non-cash contributions can be claimed as a deduction, but you will have to deal with the typical limits that apply.

If you're interested in finding out more information about how to properly deduct charitable contributions, or if you'd just like to speak to someone about your own needs in a bit more detail, please don't hesitate to contact our professionals today.

share this post
Search for matches...
Jesse Lipscomb, EA

Jesse Lipscomb, EA

Jesse Lipscomb, EA is a tax preparer based in San Diego, California. Jesse Lipscomb, EA can assist you with your tax return preparation and planning needs.

Recommended Professionals

In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.

Join 60,000 who get our weekly newsletter. No spam.

We know tax and accounting issues are complicated.

Do you have additional questions on this topic for this author?

Related Posts

Latest Posts