Finance Forward Blog

The giving season is here! As the holidays approach, charitable donations tend to increase. If you plan to give money or goods to charity this year, be sure to track your contributions so you can reap the tax benefits. Here’s how to maximize your tax deductions for charitable donations:

Choose an Eligible Charity

To qualify for a tax write-off, your gift must go to a Qualified Charitable Organization. Examples include places of worship, museums, schools, food banks, animal welfare groups, and disaster relief organizations. You can verify an organization’s status in advance using the IRS Exempt Organization Search tool.

Document Cash Gifts

For any monetary donation, request a receipt from the charity showing the date and amount. Also keep bank and credit card statements as proof of your gift. For cash donations over $250, ask the charity to provide a written letter acknowledging the gift. Accurate documentation is key to substantiating your donations. In addition to receipts, maintaining thorough records, including bank and credit card statements, reinforces the validity of your charitable contributions. The written acknowledgment for substantial cash donations ensures compliance with IRS requirements.

Writing Off Noncash Contributions

When donating used household goods, take photos as evidence and determine the items’ fair market value to claim a deduction. For donations valued at over $5,000, professional appraisals and reporting are potentially required.

Excess Charitable Deductions

If your total donations exceed the deduction limits for one year, you can carry forward the excess deduction for up to 5 additional years until the full amount has been deducted.

Consult a Tax Professional

With guidance from a tax expert, your generous charitable gifts may help lower your tax bill for years to come through smart tax planning. Our team can help optimize your personal and business finances. Contact us today to discuss your specific situation!