Knowing more about the charity contributions to be claimed under tax deductions will help to maximize potential savings.

  • More than 48% American tax filers use charity contribution to reduce their taxable revenue.
  • All the non-profit organizations are not beneficial for lowering taxable income.
  • Similarly not all gifts is eligible to qualify as tax deductible charity.

What to claim under charitable tax deduction?

Gift to proper charities or non-profit

  • Charities and the non-profits are legally classified as per their organizational structure and mission.
  • IRS registration is needed.
  • Alternatively, religious charitable organizations can get tax-deductible gifts without any need for registration but there are some exceptions. [check before contributing]

Promised donations

  • Pledge made is not counted as deductible until the money is actually paid.
  • During fund raising, if you promise to contribute $25 per month, the monthly payments really paid will count. You cannot claim for $300, if you paid only $200, during tax year.

Misconceptions cleared

  • Clients seek charitable deductions from fund-raising programs like lottery, raffle tickets, or bingo games, which are not counted as deductibles.
  • Helping specific people with loss of home from tragic issues or medical costs is not counted, but sponsoring through Red Cross or Salvation Army allows meeting deductibility test.
  • Supporting charities by attending events or buying merchandise is not deducted fully but the difference between fair market value and purchase price tag qualifies. For example, $6 price tag in retail stores is purchased for $8 at the charity fundraising means $2 deduction.

You will be surprised that the donations contributes to significant tax deduction but make sure to keep all the receipts or documents as proofs, especially needed during audits.

Categories: Charity