‘Tis the season for giving…and getting tax breaks.
With the holidays in full swing, everyone is feeling a bit more charitable. People are digging a little deeper, opening wallets a little wider and giving a little more whenever possible.
To encourage this sort of charitable giving, the Internal Revenue Service offers a financial incentive – tax breaks.
So with the year quickly winding down and the start of tax season fast approaching, let’s take a look at charitable giving and its impact on your taxes.
Ellis McCutcheon has offered his insight as a certified public accountant with nearly 10 years of public accounting experience in corporate and individual tax and auditing and review services. Mr. McCutcheon is a CPA with the Augusta accounting firm of Bedingfield, McCutcheon & Perry.
KYR: What is the most important thing for people to know about charitable giving when it comes to taxes?
McCutcheon: Donations must be made to a qualified tax-exempt organization 501c(3) to be deductible. Political contributions and gifts to individuals are not deductible. You must itemize deductions to take advantage of the tax benefit.
KYR: What counts as “charitable giving”? For instance, is a donation to church the same as dropping money into Salvation Army kettle?
McCutcheon: Cash, check, personal property (clothes, household items, cars and boats) are all deductible. Any contribution over $250 should be substantiated with a letter from the organization. Cash in the Salvation Army is deductible, but the IRS requires evidence of the donation so if you plan on more than a little pocket change a check is recommended. Also, you can receive no benefit for the donation for it to qualify. Tickets to a charity ball/fundraiser where the donor receives a meal, drinks, etc. is only deductible for the amount above the services rendered. If the non-cash item is above $5,000, such as a car, a qualified appraisal must be included with the tax return along with an additional IRS form.
KYR: Does the IRS put a limit on how much charitable giving people can claim on taxes?
McCutcheon: The IRS does limit the amount people can claim on their 1040. It is limited to 50 percent of your Adjusted Gross Income, but anything that is not allowed in the year of the donation can be carried over to the following year.
KYR: With the year coming to an end, are there deadlines people should be aware of?
McCutcheon: Donations needs to be received by the organization or postmarked by December 31, 2013 to count for 2013.
KYR: If people want to learn more about taxes and charitable giving, where can they go for more information?
McCutcheon: The main IRS publication can be found at http://www.irs.gov/publications/p526/index.html or you can consult your tax preparer.
Know Your Rights is a blog written by Gregory J. Gelpi, an Augusta attorney and owner of The Gelpi Law Firm, P.C. For more information about Greg, go to www.gelpilawfirm.com or contact him at email@example.com.
Know Your Rights is for informational purposes only. It is not legal advice. To obtain legal advice, speak with an attorney. The law varies from state to state and outcomes of individual legal matters can vary depending on the particular facts and circumstances. This blog does not create an attorney-client relationship between either the author of this blog or any attorney included in this blog and any reader of this blog.