Published: January 19, 2016
Donating your money and time to charitable organizations certainly helps those in need, something not lost on Americans who increased their giving by 7 percent in 2014.
But your generosity can also be a financial boost, offering 2016 tax benefits that can ease your federal tax burden.
What is a Charitable Organization?
The IRS maintains a list of qualified organizations. (Churches and government, however, are not listed because they do not have to apply for qualification.) In general, donations of money or property to most nonprofit charitable and educational organizations qualify for a charitable deduction. This includes cash or planned gifts such as bonds and bequests, real estate and tangible personal property.
You may not deduct donations to individuals, political parties or candidates, and other groups listed in IRS Publication 526 Charitable Contributions. If in doubt, check the IRS Exempt Organizations Select Check or contact them toll-free at 877-829-500, or ask the agency for its IRS determination letter.
How Do Deductions Work?
First, make sure you have receipts for all cash donations, which means the money you dropped into the Salvation Army kettle or similar cash basket is not deductible. And if your donation is $250 or more you must have an acknowledgement from the organization.
Your deduction for charitable contributions generally cannot be more than 50 percent of your adjusted gross income, and in some cases 20 and 30 percent limits apply.
You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return
But, remember, if you receive a benefit from the contribution, such as a dinner or tickets, you can only deduct the amount of the contribution that exceeds the benefits.
Car, boat and other vehicle donations to a qualified organization may also be deductible, but carefully review the IRS rules pertaining to such a donation.
What about Volunteering?
Many older adults tutor, deliver meals, stuff envelopes and provide other valuable services to qualified charitable organizations. However, a volunteer’s time and service are not deductible, only certain expenses related to providing the service.
For instance, you can deduct the cost of gas and oil driving to and from the site, or take the standard deduction of 14 cents per mile, and any uniforms and equipment that are required, but you can’t deduct such items as childcare and pet-sitting costs incurred while you are volunteering.
For more information, review the IRS’s Nine Tips on Deducting Charitable Contributions or our blog on 4 Tax Benefits for People 65or Older.
Molly Kavanaugh frequently wrote about Kendal at Oberlin for the Cleveland Plain Dealer, where she was a reporter for 16 years.
