Advice for making your charitable donations count at tax time

Americans are a generous bunch. Last year, donors across the country gave more than $386 billion to charitable causes, according to the National Philanthropic Trust. When moved to take action, individuals and families pulled out their checkbooks to support everything from cancer research and kids’ classrooms, to environmental issues and pet shelters.

Before the end of the calendar year, it’s worth reviewing the rules for making charitable donations, says St. Francisville-based CPA Toni Ladnier.

“Each year, you can deduct charitable contributions to 501(c)3 nonprofit organizations of up to 50% of your income,” says Ladnier. “You can donate more, but after 50%, it carries forward to the next year, with a maximum carryforward of five years.”

The amount of  tax savings depends on your tax bracket. For example, if you donate $10,000 to a charity and you’re in the 25% tax bracket, your tax saving is $2,500.

Ladnier says there are a handful of things to keep in mind when making annual donations to charities. If you donate $250 or more to a single organization, you must receive an acknowledgement letter from the organization, confirming the amount of your donation before you can include the deduction on your tax return.

To be sure your donation makes the biggest possible impact, it’s a good idea to take a look at online resources such as Charity Navigator and Guidestar, which compile information on things like how much of a nonprofit’s donations go to overhead vs. programs. The information is gleaned from the 990 tax form that each nonprofit must file annually. 

“I definitely recommend that people look at those lists, because an organization that may sound like a great cause might have a 97% administrative overhead cost, with very little going to the actual cause you are donating towards,” Ladnier says.

The rash of recent natural disasters across the United States has prompted many donors to give to relief efforts, as well as to individuals through crowd-sourcing sites such as GoFundMe.

“It’s really important to be aware of how these platforms work,” says Ladnier. “You can certainly support an individual through the goodness of your heart through GoFundMe, but donations to individuals are not tax deductible.”

By contrast, an existing nonprofit agency, such as a community foundation, can set up a special fund to support victims of natural disasters and can generate appropriate documentation for donors.

Donors can also receive a deduction for donating new and used goods to charities. It’s important to keep an itemized list that includes assigned value. You can find out the value of all sorts of used goods by using the donation calculator found on Goodwill.org, Ladnier says.  

Ladnier advises creating your itemized list before you drop off your goods. Once your donation is complete, you will receive a receipt from the charitable organization. This receipt will not specify the value of your donation. Once you get home, attach the receipt and itemized list and keep both with your tax return documentation. Any item you donate that is worth more than $5,000 must also have an appraisal in order for you to receive a tax deduction.

Finally, while you can’t claim a deduction for your personal volunteer time, you can deduct mileage for serving nonprofits that require driving, such as Meals on Wheels. Currently, that rate is .14 per mile.

“It’s worth understanding the rules associated with making charitable donations,” says Ladnier. “Because it’s a win-win for both donors and the community.”

Want to make the most of your charitable donation? BSF can help. Call (225) 635-6397 or email us to learn more.