Donate Wisely And Save On Your Taxes
You can save a lot of money on taxes if you make your charitable contributions wisely
. This way, you can ensure that you fulfill your social responsibility while at the same time avoiding the penalty of paying taxes on donations you give. For your charitable donations to be considered as tax-deductible, the following conditions must be fulfilled:
1. The contributions must be itemized in schedule A of form 1040.
2. They must be made to qualified organizations as described in form publication 526. Donations do NOT qualify if they are made to political parties, profit-making schools, and foreign governments.
3. You must contribute cash or property to the organization. Donations in form of services are not considered as tax-deductible expenses. However, unreimbursed expenses that relate to participating in a convention on behalf of a qualified organization are tax-deductible.
4. Gifts that are greater than $250 can only qualify to be tax-deductible if the qualified institution gives a written acknowledgement confirming the receipts of the money or property in question, specifying the amount of money received, and whether there were any goods or services given in return.
Expenses for Students Living With You
If you are living with a student who is in the 12th grade or lower, you are able to receive some break from the IRS on your expenses if at all there is a written agreement between you and a qualified institution about the matter. This however is on condition that the person you are hosting in your house is not related to you by marriage, blood, adoption, or fostering.
Limits to Charitable Contributions
The law does not allow you to give all your money to charity institutions and then write them off as tax-deductible expenses. The 100% limit is only allowed to farmers who are contributing to qualified institutions relating to conservation. Other donations are limited to 50%, 30%, and 20% of their gross income. Before you give any contributions to an organization, always ask:
1.) Whether the organization is a qualified institution and
2.) What their limit is.
Carryovers
In case you contribute in excess of your limit, you are allowed to carry the remaining bit into the following year. For contributions with a 50% limit or less, you can only carryover the contribution for up to five years. Contributions that qualify for the 100% limit can be carried over for up to for 15 years.
Points to Note
Some of these rules can be confusing especially to untrained taxpayers. Here are a few clarifications about the tax-deductible contributions to charity:
* When determining whether your contributions amount to more than $250, you are not supposed to add up those that are less than $250. For example, if you give $50 every month to a qualified institution, you should not add up the $50 to come up with $600 for the whole year.
* Expenses such as house repairs, depreciation, house insurance, and so on, are not to be included among your tax-deductible expenses as part of the expenses of staying with a student in your house.
* When you contribute to a qualified organization and then receive a gift in return, you must deduct the value of the gift or service that you have received from your donation. For example, if you donate $300 to a school for the deaf and then you are given a book valued at $50, you must deduct the $50 so that your tax-deductible expense is only $250.
by: David de Souza
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