Your guide to end-of-year charitable giving

Chris Peden, Supporting Partner December 16, 2019 at 9:38am

At the end of the year, our thoughts turn to buy gifts for our family and friends. We also think of those less fortunate than ourselves and donate either money or other items to help them.

These gifts not only make lives better but also can be a deduction on your tax return.

A big question that pops up is to whom you can make a donation. You can contribute to the following types of qualifying organizations:

Organizations that are set up exclusively for charitable, religious, scientific, educational, scientific, or literary purposes.
Organizations that have a mission to prevent cruelty to animals and children.
Organizations that put together amateur sports competitions, either here or abroad, as long as they do not provide the facilities or equipment.

To ensure that you can claim a deduction for what you give them, make sure you check with them before contributing to see if they can receive tax-deductible contributions. The IRS has a website set up where you can check to see if they are a qualifying organization.

What if the organization is not based in the U.S.? With the exception of certain Canadian and Mexican charities, you cannot get a deduction for these types of organizations.

However, you can donate to organizations within the U.S. who distribute the funds gathered to foreign charities, as long as the domestic organization controls to whom the funds are distributed.

Did you donate some type of art or collectible to charity? You want to do a couple of things if you do this.

First, get a letter from the organization stating that it intends to use the item donated in its main activity or tax-exempt purpose.
If you don’t get this letter, and the organization sells the property, your donation will be limited to your basis in the property when you donate it.
Otherwise, you will have to deduct the fair market value of the item donated.

You probably know you can donate cash to these organizations. And you know that you can donate property that is in good condition for the fair market value of the item at the time of the contribution.

But did you know that you can also deduct the transportation expenses you incur when doing charitable work?
Transportation costs have to be directly related to charity work.
You can deduct the cost of parking, tolls, fees, bus fare, and either the actual cost of gas and oil or the mileage times the current charitable mileage rate put out by the IRS (for 2019, it was $0.58 per mile).

If you volunteer your time with an organization, you cannot deduct the value of your time or the services provided.

Additionally, if you hire a babysitter to watch your children while you do volunteer work, you cannot deduct what you paid the babysitter.
However, if you had to purchase a special uniform that cannot be used outside of where you are volunteering, you can deduct the cost of this uniform.

Just in case you go hog wild and donate most of your possessions to charity, you will have to keep in mind that your deductions are limited.

You can only deduct up to 50% of your adjusted gross income for what you donate to most organizations.
However, if you donate to certain private foundations, veteran’s organizations, fraternal societies, and cemetery organizations, you are limited to donating up to 30% of your adjusted gross income.
If you exceed these amounts for the year, you are able to carry over for five years any contributions above this limit.

Now that you know what you can donate, you need to be sure that you keep good records of what you have donated.

This means that you keep a listing of any items donated, the date they were donated, and the name of the organization to which the donations were made.
You will also want to get a receipt from the organization acknowledging the donation.
A list of the cash contributions made, along with the date and organization to which the payment was made will make completing your tax forms much easier, and ensure that you will be able to substantiate the deduction if the IRS questions it.

Peden Accounting Services in Manassas wishes you and your family Happy Holidays and a prosperous New Year! Call them today for all of your accounting and tax needs.