Acts of charity are commendable, and many of us love to show our support for our favorite charitable organizations, by donating our money, items or time to them. But did you know that doing so can enable you to claim a deduction on your taxes?
Do a good deed and you could be rewarded, not just in knowing that you’ve done something selfless for a charity, but in the form of tax deductions, too – what could be better?
To help you get the most out of your charitable donations, here’s a short guide:
The tax benefits of donating to charity
If you’re an American taxpayer who supports a charitable organization, you can deduct that charitable giving from your total taxable income and reduce the overall total at tax time.
Charitable donations can typically only be claimed if you itemize your taxes, which the majority of Americans will do if the total of all itemizations is estimated to be higher than the standard deduction. The standard tax deduction in Mississippi is $2,300 for single filers and married individuals filing separately, $4,600 for married individuals filing jointly and $3,400 for heads of household.
If you donate regularly, or make a large contribution, you might be able to benefit from itemizing your taxes in order to claim all possible deductions.
How do I deduct charitable giving?
Begin by establishing whether the organization you’re supporting with a donation, is a registered 501(c)(3) charity, which Goodwill is. And if so, you’ll need to provide detailed records of your contributions. The charity you donate to, if registered, should be able to provide you with documentation that outlines your annual contributions.
What about donating physical items or goods?
Just be sure to get a receipt detailing the market value of any donations of physical items that you give to a charity, and if you donate goods that are worth more than $500, you might need to have the items appraised, before presenting that appraisal to the IRS when you file your taxes.
How much can I deduct?
In many instances, it’s possible to deduct most of your charitable contributions, but there are some exceptions it’s important to be aware of. Firstly, it’s usually only possible to deduct 60% of your adjusted gross income, but the amount that you’re entitled to deduct can vary according to the type of organization you donate to.
Cash donations that aren’t accompanied by any goods or services in return, are 100% tax deductible, but should you receive an item in return, you’re obliged to subtract the worth of the gift from your deductible donation. If you choose to donate items such as clothing or used goods, you should get a receipt displaying the fair market value of the items, and this becomes the amount you’re permitted to deduct on your taxes.
While you may want to seek advice from a tax professional for a more detailed analysis of your charitable contributions and how they impact your taxes, it’s important to remember that giving is always good, and any money you can save on your taxes, is a bonus!