The desire to help your local community is usually the driving force behind your charitable donations that can be made each year. You may not begin the process of giving to charity with an eye on the savings that can be had on your taxes, but at some point, you will usually look at how your charitable donations will affect your taxes. Sam Haskell believes there is a link between charitable giving and happiness with Forbes sharing this theory that people in the U.S. are happiest when they are helping others.
1. Itemize your Deductions
One of the biggest mistakes many taxpayers make when they are looking to make charitable donations is forgetting to itemize their education. If you are looking to make a change to your taxes, you need to make certain you are exploring all the options for lowering your final bill. Each year, around 70 percent of taxpayers tax the standard deductions offered to them without choosing any itemized deductions. If you are looking to make a change to the final state of your taxes by providing a change to your itemized education, you need to keep hold of your documentation and make itemized deductions when filing your taxes.
2. Watch out for Deduction Limits
Most of us will not face the problem of reaching the limits imposed by the IRS regarding the maximum deductions that can be claimed when you are making charitable donations. It is possible to donate 60 percent of your adjusted gross income to charitable groups, but this is a rare act and usually ends with you attracting the interest of the Internal Revenue Service. Charity Navigator explains the ITS will become interested in the charitable donations made by you if your giving reaches 20 percent of your annual gross income. The limits created fr the tax code have risen to 60 percent with this being the maximum that can be claimed as a deduction. Sam Haskell explains his own charitable giving has been high but reaching 60 percent is something most of us do not need to worry about.
3. Be Aware of the Tax Code Changes
The 2017 changes to the tax code made it more difficult for businesses and individuals to make major deductions when filing their taxes. The new legislation was designed to reduce the number of deductions being made throughout the U.S. each year as part of the taxation process. This led to the arrival of many new ideas and funds from taxation experts that can be chosen as part of your annual giving options. Business News Daily explains a good option to undertake is that of the donor-advised fund that allows charitable giving from a single year to be stretch across multiple taxation periods. This fund is established by your tax professional and allows you to make some choices that will give you a chance to extend your giving across multiple years. The maximum donation is made in a single tax year and deducted from your taxes. However, your charitable giving is extended across multiple years with the option of giving extended across many years with the aid of your tax expert.
4. Check if a Charity is Registered
It is easy to make a mistake when looking for a charity to make a donation that will give you the chance to deduct specific amounts from your taxes. Many organizations asking for donations are not registered charities, meaning you cannot claim these donations on your taxes. The best option is to ask for a receipt when making a donation and asking if the group is a registered charity to avoid any confusion. If an organization is registered, they will provide you with all the information needed by the IRS on your receipt.
5. Cars can be Tricky
A confusing area of the tax code is found by those who donate a car or other vehicle to a charitable group and aim to deduct the value from their taxes. It is the job of the taxpayer to value their vehicle for the IRS with many looking to inflate the value of their vehicle to obtain a higher deduction on their taxes. As far back as 2005, the IRS began taking an interest in this kind of tax fraud and has remained vigilant of overvaluations ever since.