It’s the holiday season! Now is a wonderful time to give to your favorite organizations and you have until December 31 to make your charitable contributions count for 2016. In order to maximize your tax deductibles, it’s important to keep track of all those donations.
What is a charitable contribution?
We hear this term a lot when it comes to preparing our taxes, but do we really understand what counts as a charitable contribution? It’s actually really simple; any money or property you donate to a qualified charitable organization is tax deductible. How do you know whether your organization is qualified by the IRS, you ask? Your charity should know, but you can search for them on the IRS website.
When documenting, the rules for cash donations and property donations differ. For cash donations under $250, you can use a cancelled check or statement from your bank or credit card. For donations over $250, the charity will need to provide a written acknowledgement of the donation. This can be in the form of an email or mailed letter, but you need it in order to prove you made the donation.
For property donations, you need to document the property’s fair market value, which is what you will deduct. If the property is a single item or a group of similar items worth over $5,000, like artwork, you will need an appraisal from a qualified appraiser. Also, if you drove to volunteer at a charity, you can deduct the milage at 14 cents per mile in addition to any supplies you bought for the charity.
How do I keep track of my donations?
There are many different systems you can employ to keep track of your charitable donations. It’s just a matter of trial and error to see which one works best for you! The key to a successful system is to keep all of your receipts and documents in one place so you can retrieve everything when it comes time for tax prep.
Try keeping a folder with all of your receipts and documents. For documents on your computer, print them out and put them all in the same folder. This way everything is accumulated in the same spot and you know exactly where everything is. More of an electronic person? Try scanning your receipts and documents and saving them in a folder on your computer. For those documents that end up in your email; save them as PDF files and add them to the folder as well.
No need to worry about knowing all the tax laws related to charitable donations. That’s what we’re here for! Just concentrate on keeping all your documents in one place and we’ll take care of the rest. Happy organizing and happy holidays!