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It’s Giving Season! Do You Know How to Maximize Your Donations for Tax Purposes?

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It is about the time of year many individuals donate to their favorite charitable organizations. About 30% of all annual donations occur in December, while 10% of all annual donations occur within the last three days of the year, according to Nonprofits Source. Here are a few tips on how to maximize your charitable donations for tax purposes.

  • You can deduct charitable donations on Schedule A on Form 1040 if you itemize your deductions. Donations of money or property must be made to qualified organizations. Generally, cash contributions are limited to 60% of your adjusted gross income (up from 50% previously.)
  • Ask an organization if it is a qualified organization before donating. You may also check the qualified status of an organization by using the IRS’ Tax Exempt Organization search feature. As a general rule, the IRS says the following:
    • Donations to the following can be considered deductible as charitable contributions:
      • Churches, synagogues, temples, mosques and other religious organizations
      • Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park)
      • Nonprofit schools or hospitals
      • The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc.
      • War veterans’ groups
      • Expenses paid for a student living with you and who is sponsored by a qualified organization
      • Out-of-pocket expenses incurred when you serve a qualified organization as a volunteer.
    • Donations to the following cannot be considered deductible as charitable contributions:
      • Civic leagues, social and sports clubs, labor unions and chambers of commerce
      • Foreign organizations (except certain Canadian, Israeli and Mexican charities);
      • Groups that are run for personal profit
      • Groups whose purpose is to lobby for law changes
      • Homeowners’ associations
      • Individuals
      • Political groups or candidates for public office
      • Cost of raffle, bingo or lottery tickets
      • Dues, fees or bills paid to country clubs, lodges, fraternal orders or similar groups
      • Tuition
      • Value of your time or services
      • Value of blood given to a blood bank
    • If you receive a benefit as part of your donation, you can deduct the amount of the donation in excess of the value of the benefit received, such as tickets to charity benefit events. The IRS provides two examples:
      • You pay $65 for a ticket to a dinner dance at a church. Your entire $65 payment goes to the church. The ticket to the dinner dance has a fair market value of $25. When you buy your ticket, you know its value is less than your payment. To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). You can deduct $40 as a charitable contribution to the church.
      • At a fundraising auction conducted by a charity, you pay $600 for a week’s stay at a beach house. The amount you pay is no more than the fair rental value. You haven’t made a deductible charitable contribution.
    • When making property contributions (non-cash), the amount of your charitable contribution is generally the Fair Market Value of the property donated. You must get and keep a receipt from the organization showing:
      • Date of contribution
      • Name and address of qualified charitable organization
      • Description of the property

Note: If making non-cash donations with Fair Market Values of more than $250, there are additional record keeping requirements that must be followed.

What can’t be deducted?

  • You are no longer allowed to deduct donations made in exchange for athletic seating rights at universities. For example, if you make a $500 donation to an athletic foundation to purchase football season tickets, the $500 is no longer deductible.
  • A contribution to a specific individual
  • A contribution to a nonqualified organization.
  • The part of a contribution from which you receive or expect to receive a benefit.
  • The value of your time or services.
  • Your personal expenses.
  • A qualified charitable distribution from an individual retirement arrangement (IRA).
  • Appraisal fees.
  • Certain contributions to donor-advised funds.
  • Certain contributions of partial interests in property.
  • You can’t take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. Household items include:
    • Furniture and furnishings
    • Electronics
    • Appliances
    • Linens
    • Other similar items
  • Examples of items not included are:
    • Food
    • Paintings, antiques and other objects of art
    • Jewelry and gems
    • Collection

If you receive or expect to receive a state or local tax credit as a result of your contribution, the amount you can deduct on your federal individual income tax return may be reduced or not allowed.

As a reminder, for any charitable contributions to be deductible on your 2019 individual income tax return, the contribution must be made in 2019.

Do you need help maximizing your charitable contributions? Our tax team is ready to help!

Staff Accountant Zack Tassin contributed to this article.

About Ericksen Krentel

Ericksen Krentel CPAs and Consultants, founded in New Orleans, Louisiana in 1960 with offices in New Orleans and Mandeville, believes that serving as the clients’ most trusted adviser is grounded in going beyond the numbers.

That includes helping clients achieve their business and personal financial goals by providing innovative and exceptional services in the following areas: audit and assurance services, tax compliance and planning, outsourced CFO services and business valuations for a variety of industries; employee benefit plan audits; fraud and forensic accounting; business planning; IT consulting; loss calculations; and estate planning.

Learn more at www.ericksenkrentel.com.

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