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Getting the Most From Your End-Of-The-Year Giving

December 26th, 2012

The holidays are a time for giving – and for many, that means giving to a charitable organization. Even though Christmas has passed, there are still a few days left to make a contribution that will be tax-deductible for 2012. If you’re planning on donating before the year’s end, here are some tips to ensure that your charitable gift goes as far as possible.

1. Research your organization. If you have a non-profit organization in mind already, look up its rating on a charity evaluating site like Charity Navigator to ensure that the non-profit will use your donation efficiently. Charity Navigator rates non-profits based on their financial health and their accountability and transparency, meaning that you can see how much of their funds actually go to the cause they’re championing, and how much gets lost in administrative or overhead costs. If you haven’t decided what organization to donate to, Charity Navigator also allows you to search for organizations based on cause, location, and rating. You can also verify that an organization is eligible for tax-deductible donations by using this tool on the IRS’ website.

2. Get the proper documentation. In order to claim a tax deduction on a charitable gift, you need either a bank record, such as a credit card receipt that clearly lists the name of the charity, or a receipt or letter from the charitable organization. The documentation must list the date, the amount donated, and the name of the organization. If you don’t have documentation, you can’t claim the deduction. For contributions of $250 or more, a credit card receipt won’t be enough – you must have a contemporaneously-written acknowledgement of your gift from the charitable organization that indicates the amount donated and whether or not you received any goods or services in return for the contribution. If you’re donating goods, rather than money, the documentation should have a description of the goods donated.

3. Know what your donation is worth. If you donate money, but receive goods or services in return, you must deduct the market value of those goods or services from your donation when you file your tax deduction. If you donate goods, you can generally deduct the fair market value of the items that you donate, but there are a few exceptions. Household items and clothing are only deductible if in good used condition or better, unless you’re donating an item that is valued at over $500 – then, you may take the full deduction, so long as you have an appraisal for that item.

Donations of motor vehicles, boats, or airplanes are a little more complicated. For a complete explanation of what sort of deduction you can claim when you donate your car, check out this handy guide from car donation blog Kars 4 Kids.

While these tips can get you started on basic charitable donations, the rules quickly become more complicated with donations of jewelry, art, or stocks; donations over $500; or donations of goods worth more than $5,000. If you are making a large donation or are donating an unusual or valuable item, be sure to consult with a tax professional to ensure that you are properly accounting for your deduction on your tax return next year.

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