You don’t have to be rich to be generous, but when you do give to others, you can simultaneously put a little money back in your own pocket. That’s right, we’re talking about making those donations and charitable gifts count at tax time.
So how do you know what you can deduct and where to put those contributions on your tax return? We’re here to help you Nav.it like a pro. Follow these steps and you’ll ensure that your donations help others—and your bottom line—this year.
Do your due diligence
Before making a donation that you hope to deduct at tax time, be sure the charitable organization you’re supporting is qualified. Uncertain? Simply ask to see the letter the Internal Revenue Service (IRS) provided the charity. Organizations are accustomed to this request, so many post this letter on their websites, making it easy to find.
Sites like Charity Navigator help you find charities you can trust and support as well as confirm you’ll receive a deduction at tax time. You can also verify an organization’s status by calling the IRS at 1-877-829-5500. Churches, temples, and other religious organizations are typically deemed charitable organizations, but again, if you have any doubt, check it out first.
Helping out individuals, while kind, won’t count
As generous as you might be to friends with GoFundMe campaigns, these may not be deductible. Only donations made to GoFundMe Certified Charity campaigns (valid for U.S. registered 501(c)(3) charitable organizations only), are guaranteed to be tax deductible. If you’ve made a donation to one of those campaigns, you’ll receive tax-deductible receipts automatically from GoFundMe’s charity partner, PayPal Giving Fund.
Keep your receipts (cash included)
Simply stating that you made a donation isn’t going to cut it with the IRS. You’ll need to back it up with evidence, which typically can be a receipt — for cash or credit — or a canceled check. If you’ve made a donation of $250 or more to a single charity, you’ll also need a letter from that organization with the date and amount of your contribution, which serves as an acknowledgment of your donation to that qualified organization. While you won’t need to attach it to your return, you’ll want to have it available should you be audited.
Don’t forget about payroll deductions
If your employer allows you to direct payroll deductions toward a charity, you’ll need to hold onto your pay stub or W2 as proof of that contribution, as well as a pledge card bearing the name of the charity.
What about gifts?
If you’ve donated goods, you can claim the fair market value at tax time, but if they’re valued at $500 or more, you’ll need to complete and attach Form 8283.
Volunteering time and talent isn’t tax-deductible…
However, any expenses incurred while helping out may be. So, keep those receipts for parking, tolls, uniforms, or supplies you needed to get the work done.
Be sure to keep an eye on the time as well. If you’re hoping to take off a deduction for 2017, you must make your contribution during that year. Checks written and mailed before year-end count, as do credit card donations — even though you may not actually see any cash leave your account until 2018.
Itemize your deductions
Once you’ve made your donations and have gotten your records and receipts in order, you’re ready to claim your charitable deductions on your tax return. To do so, you must itemize them on Schedule A on your federal form 1040 using lines 16-19.
If you have any questions, don’t hesitate to contact a professional tax preparer. This is definitely a situation where you’d rather be safe than sorry.
We’re changing the narrative around money but change can’t happen with a one-sided conversation. That’s why we’re excited to bring different voices and experts to share their wisdom. Send us an email and let us know what you think. And remember the nav.it money app offers you free tools for checking in and managing your money moves.
You can download it at Google Play and the Apple Store.
