How to Receive a Charitable Tax Deductions

A tax-deductible donation is a contribution of money or goods to a tax-exempt organization, such as a charity. Contributions can lower your tax liability and lower the possibility of facing IRS trouble. You can claim Tax-deductible donations on your taxes if you itemize on Schedule A of IRS Form 1040 or 1040-SR.

During the 2021 tax year, taxpayers can deduct up to $300 of cash donations without itemizing. This means a married couple filing jointly could deduct up to $600 of donations without itemizing. The deduction is known as an “above the line” deduction. 

To get the advantages of charitable tax deductions, count on our tax professionals. We can also help you with business taxes, bookkeeping services, and even payroll service. Get in touch with our tax office and start talking with a tax accountant and if you want to learn more about these deductions, read on.

How Much Can I Deduct?

Generally, you may deduct up to 60% of your adjusted gross income from charitable contributions, but depending on the type of donation and the organization (contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery associations may have lower limits). you can find details in IRS Publication 526.

• Doesn’t matter how many organizations you donate to throughout the year; the limit will apply to all donations.
• You may be able to deduct contributions for five years – or until they’re gone – through a process called carryover.
• In 2021, you’ll be able to deduct up to $300 per person rather than per tax return. A married couple filing jointly could then deduct up to $600 of donations without itemizing.
• CARES Act eliminates the 60% cash donation limit for public charities.

Tax-deductible Donations and How To Claim Them

As a general rule, itemize your taxes. If you want to claim tax deductions for charitable donations, you must itemize your deductions when you file your taxes. You need to include Schedule A with your tax return.

Before making a decision, weigh the pros and cons. If you itemize your deductions, it may take more time and may require more expensive tax software or create a higher bill from your tax preparer. Plus, if your standard deduction is greater than the sum of your itemized deductions, you may be better off abandoning itemizing and taking the standard deduction instead. Nonetheless, if you abandon itemizing, you cannot deduct what you donated.

Here are the standard charitable deduction amounts by filing status. $12,950 for single filers, $25,900 for married couples, and $19,400 for the head of household.

You might want to skip itemizing (and thus claiming those tax-deductible donations) if your standard deduction exceeds your itemized deductions.

As this could be complicated, we suggest working with a certified tax consultant. SCL Tax Services in & near Bronx, NY, is more than happy to help you deduct your taxes. 

Keep These in Mind

Charitable tax deductions come with many ifs and buts, so we’ve gathered these tips to help you deduct as much as possible. 

Select the right organization

If you want your donation to be deductible, it must be made to an IRS-approved nonprofit organization. Often, these are charitable, religious, or educational organizations, though they can be anything from your local fire department to an organization that prevents cruelty to animals.

• If you’re not sure whether the organization you want to help is eligible for tax-deductible donations, you can check online at IRS Tax Exempt Organization Search.
• Using this site, you can instantly find out if an organization qualifies by entering its name and location.

Ensure that it counts

To deduct cash contributions, regardless of their amount, you need a canceled check, bank statement, or receipt with the charity’s name and donation amount. If you want to deduct your donations, you cannot put cash in a church collection tin or in a Salvation Army bucket.

Timing is key in all deductions. Contributions can be deducted in the year that they are made.

• When you mail a check to your favorite charity on December 31, you can deduct it from your tax return for that year.
• You can write off the donation even if you don’t pay the credit card bill until the following year, even if you charge it on a credit card.
• A pledge, though, is different: Because it’s only a promise to make a donation in the future, there’s no deduction until you actually donate.

Donations are limited

In addition, there is a limit on how much you can deduct. A general rule is that you can’t contribute more than 60% of your adjusted gross income (AGI) to qualified public charities, colleges, and religious groups (100% of AGI for qualified charities in 2020).

• Other types of nonprofits have lower gift caps. In the case of gifts of appreciated property, the limit drops to 30 percent of AGI.
• When these restrictions limit your deduction in the year of the gift, the excess deduction carries over to the next year.

It is also important to remember that you cannot write off a contribution if you receive something in return.

For example:

• If you buy a $60 ticket to a church fundraising dinner, but the dinner costs only $20, you can deduct $40.
  • $60 donation – $20 return = $40 deduction
• If your donation exceeds $75, the nonprofit must give you a written statement explaining what you received in exchange and reminding you that it cannot be deducted from your taxes.

Appreciated property

The most tax-saving option may not be cash but appreciated property, such as securities, real estate, art, jewelry, or antiques.

• If the property has been owned for more than a year, you can deduct the full fair market value and avoid income tax on the appreciation.
• If you hold the property for less than a year, IRS only allows a deduction for the price you paid.

Say you own stock that you purchased for $1,000 many years ago, and it is now worth $10,000, and you would like to donate that $10,000 to a major fundraiser for your alma mater. If you write a check for $10,000, your college will receive $10,000, and you will get to deduct $10,000.

If, instead, you give the $10,000 worth of stock,

• The college still gets $10,000 (it will not be taxed on its profit when it sells the stock.)
• You can still deduct $10,000.
• You eliminate the capital gains tax you’d pay if you sold the stock for $10,000: The $9,000 profit would trigger a capital gains tax of $1,350 on that sale. You save $1,350 by giving stock instead of cash.

How a gift is used affects donor value

When donating tangible personal property, how the charity uses the item affects how much you can deduct.

• When you donate land to a local homeless shelter so they can build a new facility that will house more people, you can deduct its full market value.
• In case you donate an artwork for the shelter’s fundraising auction, your deduction is based on the price you paid for the artwork.
• Wouldn’t it be great if you donated the piece of art to a museum so it could be displayed in its collection? Then you will be able to deduct its full value.

A formal appraisal is required if the property is worth more than $5,000 ($10,000 if the stock is held by a closely-held company). You should also make sure the appraiser is a member of a recognized professional group or meets minimum education and experience requirements. If not, the IRS may deny your deduction.

Bronx Tax Services Is Ready To Help

With us, you won’t have to worry about taxes anymore. Our tax professionals know the ins and outs of tax laws, so contact us and put your trust in SCL Tax Services in & near Bronx, NY. Call us at 347-305-4348!

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