With less than two weeks left to file your taxes, you’re likely to have many questions about charitable deductions and how the recent tax laws will affect you. For the April 17th deadline, fear not — the process is the same, the tax law won’t change your return until next year. But there are other important things to keep in mind when filing your taxes this year, especially when it comes to your donations. Donating is always a great way to give back and getting the additional deduction is an added bonus for many. As Charity Navigator is the nation’s largest and most-used evaluator of charities; we see on a daily basis how donations can change communities.
Under the 2017 tax code, which applies for the taxes you’re filing for this April, individuals receive a standard deduction of $6,350, and couples receive a standard deduction of $12,700. Next year, these numbers will change, so be sure to keep an eye out for how your filing process will be affected. When you give to charity, you’re potentially able to file with itemized deductions. Here’s what you need to know to maximize your tax break:
Donations must be tax-deductible.
Not all donations are tax-deductible! To qualify as a tax-deductible contribution, the gift must be made to a 501(c)(3) organization, as determined by the Internal Revenue Service.
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So, what does this really mean?
Organizations that receive a 501(c)(3) designation from the IRS are typically service providers and are not involved in political or lobbying activities. For example, a contribution to your local animal shelter that is involved in rescuing pets, providing them shelter, and finding them new homes would be tax-deductible. However, a gift to your favorite political candidate’s campaign would not be.
A quick tip: Charities must receive a 501(c)(3) designation to qualify for a Charity Navigator rating.
Donations must be made in the calendar year.
For filing this tax year, this means your contributions must have been made between January 1, 2017 and December 31, 2017. If you’re one of the many people who wait until the last week of December to make their donations, make sure your receipts are all properly dated for the 2017 calendar year.
Donations must be properly receipted.
Keep all of your receipts when you give! And if you haven’t taken the time to do so for this year’s filing, consider taking a day to do so. This will help you keep track of all of your charitable giving when it comes time to file your taxes, and provide you with records of your gifts if you were to be audited.
It is important that your donation receipts include language stating the date the gift was made, the amount of the gift, how the gift was made (cash, stock, in-kind, etc.), and that no goods or services were received in exchange for your gift.
Donations must be in excess of the standard deduction.
Every tax filer receives the standard deduction based on whether they file individually or as a couple. In order for charitable contributions to count toward increasing your deduction, they must be in excess of the standard deduction. A tax-prep service or accountant will recommend itemizing your deduction, if it exceeds the amount of the standard deduction. They will use your donation receipts to properly deduct your charitable contributions.
For specific questions about filing your taxes, deducting charitable contributions, or planning for future charitable giving, it is always best to seek the opinion of a professional accountant or financial adviser!
Larry Lieberman is the Chief Operating Officer of Charity Navigator.