Choosing a Charity
When selecting a charity ensure you pick a group that is tax-exempt under section 501(c)(3) of the Internal Revenue Code. Any donations made to individuals or political candidates will not be considered as deductible donations. Pick a charity either a popular charity or one in your local community. This way when you say you donated to this charity, the people you are speaking to know of the charity as well.
Record Everything
When including donations in your taxes, you will need to itemize each deduction on Form 1040, Schedule A. When giving your donations throughout the year and during the Christmas season, ensure you record the organization, contact name and number at the organization, date of the donation, amount of the donation and any special notes. Special notes could include information about what the donation was going to be used for or any special permissions or gifts resulting from the donation.
Don’t Claim What You Get
To determine how much of your donations you can claim there is a bit of math involved. If you gave a donation of $200 and received a thank you gift in return, you can’t claim the full $200 for the donation. For example, if you received a gift basked for your donation, you can only claim $170, because the gift basket would could as $30 you received back from your donation.
As well, if you donate an item worth $100 and it is auctioned off for $50, you can only claim the $50 the charity received for the item. If you purchase an item for $50 and the charity auctions it off for $100, you can still only claim $50.
Get & Keep Receipt
With tax deductions, if you don’t have a record of the transaction, you can’t claim it. You can get a bank statement, pay check statement, or written confirmation from the charity, but all must clearly state the amount you donated.
If you donate anything worth $5,000 or more you will need to complete Form 8283, Section B in your taxes. You may also be required to get an appraisal from a qualified appraiser.
When To Give
Consider which tax bracket you are in before giving your donation. For example, if you expect that you will make more in 2011 than in 2012, you will want to donate and claim the donations in 2011 because it will make a larger impact on your taxes.
Volunteering
When volunteering or working with a qualified tax-deductible charity there are other items you can deduct for your taxes. For example if you work at an organization as a clerk, you can deduct the cost of your transportation back and forth, but you can’t deduct the time they pay you to be a clerk. You can also deduct uniforms and other expenses occurred while completing volunteer work, anything except for time.
Post Recognition
If you receive a letter stating a thank you for the donation, or a certificate thanking you for your donation, take a photocopy of this and frame it. Post the recognition of your donation in your office or store. Having those around notice you donate to local or popular charities changes their perception of you. This can increase your reputation with business associates.
Research Charities
When you are planning on giving any kind of donation to a charity, look them up on the Better Business Bureau website. This website will show you any complaints or problems a charity has had in the past. It can help guide you in which charities are well respected and which should be avoided during this giving season.
It is the season of giving. Know all the facts about deductions available on your taxes as a result of donations. Giving a donation feels good to begin with, but getting deductions on your taxes for it as well is an added bonus that can help small businesses.
