Donating to charity is a good way to support the causes you care about. For taxpayers, donating to charity is also a way to deduct expenses from taxable income, which can lower overall tax bills. Taxpayers that are donating to charitable organizations should note that there are certain requirements that their donations must meet in order to deduct them. An experienced accountant can help taxpayers claim deductions for their charitable donations.
Roseville charitable giving accountants from Cook CPA Group are able to help taxpayers in California claim deductions for their charitable donations. No matter the size or type of charitable donation you make, Cook CPA Group’s accountants can provide guidance to taxpayers as they claim deductions for their charitable donations.
Rules for Making Charitable Donations
Both individual taxpayers and businesses may deduct their charitable donations from their taxes. The requirements for what must be included in a charitable donation for it to qualify for tax deductions vary between individuals and businesses and also vary depending on the type of business that is seeking the deduction.
Deductions of Charitable Donations for Individuals
For individuals to be able to deduct charitable donations from their taxes, their donation must meet certain requirements. Firstly, they must donate either cash or property. Also, they must donate to an organization that qualifies for tax exemption. Charities will make this information readily available to donors, though donors can use a search tool available on the IRS’s website to determine whether an organization is qualified for tax exemption. To deduct a charitable donation from their taxes, an individual must provide copies of certain relevant records, such as canceled checks, appraisals of property value, acknowledgment of the donation from the charity that received it, among others.
In most cases, individual taxpayers may deduct up to 50% of their adjusted gross income from their taxes, as long as they provide an itemized list of the donations they’ve made. Certain charitable organizations are only eligible for a 30% deduction. When individuals donate property, the value of the property may be deducted from their taxes. Individual taxpayers that are donating to charities may only deduct contributions that are no more than 30 percent or 60 percent of their adjusted gross income, depending on their tax-exempt status.
Deductions of Charitable Donations for Businesses
Like donations made by an individual, donations made by businesses must meet certain specifications. To be deducted from taxes, charitable donations made by businesses must be either cash, property or equipment (known as “in-kind” contributions), and travel expenses that were acquired while working for a charitable organization. Property donated to charities by businesses may be physical property such as buildings, but it may also be intellectual property, such as patents and trademarks. Businesses should note that deducting time spent as a volunteer for a charitable organization is not allowed. Also, payments that are deducted as charitable donations may not be deducted as business expenses.
Tips for Deducting Donations to Charities from Taxes
To be properly prepared to deduct their charitable donations when it’s time to pay taxes, individuals and businesses can pay attention to specific tips.
Firstly, it’s important for businesses and individuals to keep close records of the details of their charitable donations if they plan on deducting them from their taxes. Taxpaying individuals or businesses should keep all documents associated with their donation, including bank statements that show that the donation was made and the receipt of the donation from the organization that received it.
When donating property, keep specific records of the items that you’ve donated. Record the condition that each piece of property is in when it is donated, as well as its value. Make sure to record specific units and amounts; for example, if you donate groceries to a charity, be sure to record the weight of each item. You may even want to take photos of the items that you donate. If you are donating property that is worth more than $5,000, you will need a written appraisal of the value of the piece of property.
Donors should note that they should use caution when donating to charities online. Websites often have outdated or inaccurate information and may not be qualified to receive deductible donations, even if their website says they are. When donating to an organization using the internet, make sure that you are in touch with a person that works there so that you can confirm the tax-deductible status of the organization.
Some individuals or families may be interested in maximizing their charitable donations by bunching them together. Bunching entails bundling multiple years of charitable donations into one year’s worth of tax deductions. Doing so can allow taxpayers to surpass the threshold of exempting them from itemizing deductions, which means that they can receive the full value of their donation instead of a percentage of the amount. Bunching, however, does require some long-term tax planning on the part of the taxpayer and their accountant.
Contact Our Roseville Charitable Giving Accountant
Experienced accountants are available to help people get the most out of their tax refunds. Get in touch with Cook CPA Group today to schedule a free consultation about claiming deductions for your charitable donations