Year-end Tax Deductions: How To Know If Your Charitable Contribution Is Tax Deductible

One of the easiest ways to reduce your taxes is to be a generous person

. Generally speaking, contributions to tax-exempt charitable organizations are deductible as an itemized deduction on Schedule A. If you do not itemize deductions on Schedule A, you can still make the contribution, but it won't be deductible for federal income tax purposes.

How much can you benefit by making a charitable contribution by the end of the year? If you're in the 25% tax bracket, giving away $10,000 reduces your federal income taxes by $2,500. The organization gets the $10,000 and it only costs you $7,500. Is that a great deal or what?

But how do you know if your charitable contribution qualifies for the deduction? One factor is whether the organization is exempt from federal income tax.

So how do you know if the organization is tax-exempt? There are three easy ways to find out:

1 -- Ask to see the organization's IRS letter recognizing it as tax-exempt. Just pick up the phone and call them.

2 -- Phone the IRS toll-free at 1-877-829-5500. Of course, don't be surprised if you are put on hold, so remember to have a good book or favorite magazine nearby when you make this call.

3 -- Search IRS Publication 78, Cumulative List of Organizations. Go to the IRS website to do the search - here's the link: http://www.irs.gov/charities/article/0,,id=96136,00.html.

With the year coming to an end, you only have a few weeks left to make charitable contributions that can be deducted on your 2010 personal tax return, so this is a good time to decide what additional monies you want to give, and to whom.

One final thought: don't be surprised if your favorite charity isn't listed in the IRS records as tax-exempt. Churches and synagogues that meet the requirements of Internal Revenue Code section 501(c)(3) are automatically considered tax-exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.

Many churches and synagogues go ahead and file the necessary paperwork to receive official 501(c)(3) tax-exempt status from the IRS. But keep in mind that such an organization is not required to do so, so if you phone the IRS or visit the IRS website and discover that your church or synagogue is not on the list, that's OK. Your contributions are still tax-deductible to the extent allowed by law.

by: Wayne M Davies

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