It can actually pay to be generous. Most people are aware that monetary donations can be itemized as a deduction for income tax purposes. However, some people forget that you don’t have to donate only cash in order to receive this benefit. Any property also qualifies for this deduction. You can even deduct your travel expenses to volunteer at charitable organizations! Let’s take a closer look.

DonationsEveryone knows that charitable contributions of cash or check can be deducted when you itemize deductions. The catch is, generally individuals can only write off up to 50% of adjusted gross income and some corporations can only write off up to 10% of their pre-tax income. Any gifts over and above these amounts can be used as a deduction the following year. Any cash contributions of more than $250 will require a “contemporaneous written acknowledgement” from the qualified organization. This just means that the organization formally notes the amount and date of the donation in writing and gives you a copy for your tax records. Individuals and businesses also can’t receive goods or services for their charitable contributions. Some examples include tickets to a gala or special event, sports tickets, etc. If goods or services are received for the charitable gift, only the amount that exceeds the fair market value of the goods or services is deductible. For donations over $250 where goods or services are received, the contemporaneous written documentation should include a description and good faith estimate of the goods or services being received by the donor

All of this information is pretty common knowledge. What many people tend to forget is that charitable contributions don’t stop with cold hard cash. Charitable gifts can also include property—cars, clothing, furniture, household items, etc. The same deduction limits apply, but property donations are calculated and deducted the same way that cash and checks are. Again, if you make a donation of property worth more than $250, you’ll need written documentation of a description of item(s) donated and their fair market value from the organization accepting your donation. If any goods or services were provided by the charitable organization, the difference between the value of the services received and actual donation amount will need to be netted to determine the actual donation amount. If the property value donated is greater than $250, the organization will need to provide a description of the goods or services received along with a good faith estimate of value on the contemporaneous written acknowledgement of receipt.

Maybe instead of giving money or property to charitable organizations, you donate your time instead. Unfortunately, the saying “time is money” doesn’t apply here. The IRS won’t allow you to deduct a dollar amount for your time; however, you can deduct gas and parking expenses related to your volunteer projects. Figuring out the exact fuel expense to get to and from your volunteer work may be more of hassle than it’s actually worth. Instead, consider using the standard mileage deduction rate as mandated by the IRS. If the organization you are donating your time to requires you to purchase some sort of uniform to wear while volunteering, that’s another fully deductible expense.

As always, the tax code is pretty complex. There are certain instances where the 50% contribution ceiling may actually be lower. If you have questions regarding the deductibility of your charitable gifts or their limits, Wealth Builders CPAs & Consultants can help. We can help to guide you so that you receive the maximum deduction possible and make every dollar you gifted count. Give our office a call and schedule your free consultation today!

 

“Charitable Contributions Deductions.” IRS, 6 Aug. 2017, www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions.

“Topic No. 506 Charitable Contributions.” IRS, 21 Sept. 2017, www.irs.gov/taxtopics/tc500/tc506