Taxpayers can simultaneously support causes they care about and lower the amount of taxes they have to pay by donating to charity. Figuring out whether or not you meet the requirements that enable you to deduct donations from your taxes can be difficult, so it’s usually recommended that taxpayers seek the help of an experienced accountant to claim deductions for charitable giving.
The Sacramento accountants for charitable giving from Cook CPA Group can offer their tax preparation services to taxpayers claiming deductions for their charitable donations. Our accountants can help taxpayers determine whether their charitable donations meet the requirements to claim them as tax deductions.
Tips for Making Charitable Donations
When making donations to charities, there are certain things that taxpayers can do to make it as easy as possible to deduct those donations from their taxes. The following are tips for taxpayers making charitable donations:
Maintain Meticulous Records
Taxpayers intending to deduct charitable donations should keep detailed records of the donations they make. Documents that prove that the donation was made can include bank statements that reflect a record of the donation and receipts from the charitable organizations that received the donations. If you donated property to a charitable organization, you should document the value of the property as well as the condition that property was in at the time of donation. Taxpayers who make property donations worth more than $5,000 must have written appraisals of the value of the property to prove how much it was truly worth.
Donate the Right Things
Many taxpayers donate money to charitable organizations because it’s easy for them to deduct the cost from their taxes. However, there are advantages to donating other things, such as appreciated assets. When taxpayers donate stock that has appreciated in value, they are often able to deduct the fair market value of the donated property and avoid paying capital gains taxes. When donating to charitable organizations, taxpayers should be aware that they must document whether they received something in exchange for their donation and then deduct the value of that item from their donation. Taxpayers should note that donating time or services to an organization is not tax-deductible and that donations to individual people or organizations that do not properly qualify as charitable organizations are not deductible.
Confirm That the Donation Is Tax-Deductible
Not all donations are tax-deductible, which is why it’s important for taxpayers to confirm that the charity that they would like to donate to accepts tax-deductible donations. Information on a charity’s website is often inaccurate, which means that it’s important for taxpayers to speak with a representative from the organization to confirm that they will be able to deduct their donation from their taxes. Taxpayers can also check online to confirm that the charity they would like to donate to is qualified for deductions by using the Exempt Organizations Select Check provided by the IRS.
Generally, deductible charitable organizations include governments, nonprofit schools, nonprofit hospitals, veterans groups, and private charitable organizations that support specific causes. Donations to religious organizations are also always tax-deductible. Donations that aren’t tax-deductible include those that are made to sports organizations, for-profit businesses (including schools), lobbying groups, civic leagues, foreign organizations (with some exceptions), homeowner associations, political groups, and individual candidates running for office.
Consider Bundling Donations
Some taxpayers may be able to maximize their deductions for charitable donations by “bunching” them together strategically. When taxpayers bunch their donations, they group donations from other years into one year’s tax deductions. This often allows taxpayers to claim charitable donation deductions during one year so that they can take the standard deduction in other years instead of itemizing their deductions every year. Bunching requires long-term tax planning that can be done with the help of an accountant.
Charitable Donation Tax Deduction Limits in California
As discussed, donations must be in the form of cash or property to qualify for charitable donation tax deductions. They must also go to a qualifying charity or else you cannot claim deductions for these donations. In addition, individual taxpayers might face limits on the amount they can deduct.
Individuals can usually deduct up to 20% of their adjusted gross income as appreciated capital gains assets. They can also deduct up to 30% of their adjusted gross income as non-cash assets and up to 50% of their adjusted gross income as cash assets. Understanding these limits is vital if you want to make sure that you do not deduct too much or underpay your taxes.
Charitable Donation Rules for Businesses in Sacramento
Charitable donations made by businesses are subject to certain requirements. Businesses are only able to deduct charitable donations from their taxes if they follow certain rules. Businesses can donate property, which can either be physical property like buildings or intellectual property like trademarks. Alternatively, they can donate equipment, which is known as an “in-kind” donation. Businesses are also able to deduct the cost of travel while doing work for a charitable organization. Charitable donations are not deductible as ordinary business expenses and must be deducted as charitable donations instead.
Get in Touch with Our Sacramento Charitable Giving Accountant
Charitable giving helps both the donor and the recipient if the donation qualifies for tax deductions. Taxpayers can use the help of an accountant to include deductions for charitable donations when they prepare their taxes. The Sacramento charitable giving accountants that work with Cook CPA Group can work with taxpayers to help them get the most out of their taxes.