During the season of giving, Americans dig into their pockets to give back to their favorite charities. You can give and receive this holiday season with tax deductions on charitable donations, minimizing taxable income and lowering the total amount you owe come April 15. Check out charitable giving FAQs from Putnam Bank to help you make the most of your generosity.
Where does my gift need to go to make it tax deductible?
Score a deduction by itemizing and filing a 1040 form when you donate to a qualified organization. Non-profit institutions like religious groups, public government causes, nonprofit schools and hospitals, public parks and recreation areas, and war veterans’ groups fall under the qualified category, whereas for-profit entities, individuals, and political candidates for public office, don’t make the cut.
What’s with itemizing?
There are two types of deductions: standard and itemized. Standard is a fixed amount that reduces the income you’re taxed based on your filing status and age. Itemized lets you list your deductions on a schedule, which includes filings like property taxes and charitable donations. If you claim standard instead of itemized on gifts, you may not receive the deduction you deserve.
How much can I deduct from charitable donations?
If your cash benefits a public organization, deduct up to 50 percent from that year’s Adjusted Gross Income (AGI). That means that a $25,000 donation from your $40,000 AGI will only let you claim $20,000 on your charitable gift in the year that you give it. You can, however, roll over that extra $5,000 up to five years after donating. For contributions to private donations like the Bill & Melinda Gates Foundations, use the same rules but swap 50 percent with 30.
I donated stuff, not cash. Does that count?
Yep! Household goods (clothing, furniture, certain appliances, etc.) and other personal property can be claimed based on fair market value; however, it must be in good or better shape than when it was first purchased in order for the IRS to count it as a deduction. Regardless of the item, keep track of receipts from your donated items, which is required for donations of more than $250.
Happy giving and happy holidays from Putnam Bank!
Equal Housing Lender, Member FDIC