Tips for Making Your Charitable Donations for the Year Tax-Deductible

Dec 21, 2016

Things to consider when wrapping up your holiday donationsWith the giving spirit of the holidays upon us and the year quickly drawing to a close, numerous charities are stepping up their donation drives in search of funds from those who are ready to support worthy causes. Helping to invigorate this year-end push for donations is, of course, the final opportunity for taxpayers to generate deductions that can be applied when they file their 2016 return.  If you’re considering allocating some of your income to a charitable organization this holiday season and would like some guidance before you finalize your donations, take a look at our suggestions here:

Concentrate on just a few areas that resonate with you: You’re in a better position to make a bigger impact on the works of those organizations that reflect your values, passions and ideals if you make larger donations to fewer charities rather than doling out smaller amounts to the numerous charities that solicit you for funds this time of year. By choosing to narrow your focus, you’ll also become more invested in those organizations that are a good fit for you, and therefore you’ll be more likely to follow what they are doing throughout the year to ensure that your donations are being put to good use.

Check that your charity measures up: Has a particular organization caught your attention recently but you’re not quite sure that you have all the facts you need to render a responsible decision about making a sizeable donation to it? You can find information on the financial well-being, accountability and transparency of thousands of charities at Charity Navigator. This online service also allows you to maintain records of your contributions in one place and donate online to your favored charities. What’s more, Charity Navigator is an excellent tool for those who want help in selecting charities because it allows users to browse by more than 10 categories—from animals and arts and culture to community development and human services.

Make sure the IRS recognizes the charity: If you’re planning on taking individual tax deductions from your charitable contributions this year rather than claiming a standard tax deduction for your filing status, you’ll need to itemize these deductions on Schedule A of IRS Form 1040. So if you’re counting on these deductions, make sure that the organizations you donate to qualify according to the IRS rules. For details on this criteria, visit http://bit.ly/CharitableContributionDeductions.

Maintain accurate records for tax purposes: To claim itemized tax deductions from charitable contributions, you must supply proper documentation regarding their value when you file your return. For cash donations less than $250, you’ll simply need to keep a cancelled check or receipt with the amount and date of the donation. But for donations higher than $250, the charity must provide you with a letter that states whether you received goods or services in return as the donation is not deductable if what you received is in excess of the donation (e.g. value of a dinner at a charitable fundraiser). Gifts of property are more complicated and may require additional documentation and possibly even a professional appraisal, but they can generally be deducted for their cash value at the time of the donation. For information on what’s required in order to make property deductions, visit the Motley Fool at http://bit.ly/MotleyFoolCharitableDonations.

Looking for a way to help those in need and provide positive change in our community but short on funds to contribute this holiday season? Consider clearing your home of clothing, electronics, appliances, furniture and other items that are no longer serving you to donate them to an organization that will put them to good use.  Not only will you be starting the New Year in a more clutter-free home, but you can also receive a tax write-off on their fair market value.  Just be sure to fill out a Form 8283 from the IRS if these noncash charitable contributions are valued at more than $500. Prefer to donate your time and expertise to a good cause? Our blog post on holiday volunteer opportunities in the Bay Area is a great place to turn to for ideas and inspiration!