What You Need to Know About Year-End Gifts to Charity
It’s the season for giving, and even if you missed out on #GivingTuesday you still got some time to make those last-minute donations if you want them to count for your 2017 taxes. But before you open your checkbook or click on those holiday appeal links, you’ll want to keep the following things in mind if you’re concerned about how your charitable giving will affect your imminent tax return.
Only people who itemize on their tax returns will see any benefit.
According to IRS.gov, only 29.6% of Americans itemize on their tax returns (just about 1 out of 3 people.) The vast majority of people take the standard deduction for their particular filing status which means that there’s no tax benefit if you’re a homeowner, give to charity, or have huge medical bills. There are certain deductions available to most people based on income level regardless of whether you itemize or not but unfortunately, gifts to charity aren’t one of them.
You should still donate to causes you care about if you feel inclined to: just don’t expect to see a difference on your tax return.
Donations must be made to eligible organizations to be deductible.
Because so many people give during the holiday season, charity scams are common this time of year. Most well-known nonprofits will have “501(c)(3)” in the header or footer on their site but newer or smaller charities might not. One way to be sure is to check with the IRS Select Check database. Generally, schools, hospitals, fraternal lodges, and nonprofits with some kind of public purpose in the arts, education, sciences, and public services will have 501(c)(3) status.
You can’t deduct contributions to social clubs, political candidates or PACs, community fundraisers that aren’t registered as eligible nonprofits, gifts to individuals, or crowdfunding sites. While these are generous acts and ultimately you decide where your money goes, just be aware they won’t result in any tax benefits.
If you donated more than $250, you need additional acknowledgment from the organization.
If you give a single gift of $250 or more, you need to get a letter from the charity stating that you not only donated this amount but also certifying that you didn’t receive anything in return for your donation.
Interestingly, this doesn’t apply if you made several gifts throughout the year (such as $25 being automatically charged to your credit card every month.) But if you don’t see personal acknowledgment for larger gifts, make sure to follow up since your receipt won’t be enough to substantiate the deduction.
Charitable giving is a very personal decision and tax benefits might not be your top priority when it comes to your acts of kindness. But if you want to know how your giving affects taxes, you’ll definitely want to keep these things in mind.