Charitable gifts: a present for those in need and you at tax time
Wednesday, December 24, 2014
Are you still shopping for the perfect gift? Let me share my motto with you: Say it with cash.
Some folks find monetary gifts crass. They are not related to me. As the old saying goes, green looks good on everybody and always fits.
Another good thing about financial gifts is, for most of us, there are no tax consequences. As I noted this last week at my other tax blog, the Internal Revenue Code gift giving rules are pretty generous.
But there's another type of giving, your financial or other support of a charitable group.
The latest Weekly Tax Tip looks at how you can claim a tax deduction for your charitable gifts.
The key considerations are donating by the end of the tax year, keeping good records, itemizing when you file that year's tax return, and checking out the charity.
Checking up on charities: It's crucial to know exactly what the nonprofit you support will do with your money, as well as how much of your money goes to the cause vs. administrative service.
You also want to double check that the charitable group meets Internal Revenue Service standards. If it's not an IRS-qualified group, then you can't legally claim a tax deduction for your donation.
You can check out charities at Charity Navigator, Charity Watch, Guidestar, and via the IRS' Exempt Organizations Select Check search tool. Veteran tax folks might remember IRS Publication 78; this is the online version.
What's not qualified: Things you won't find in any of these nonprofit directories are ad hoc collections for folks down on their luck or groups that are chartered outside the United States.
"The Jones' house burned down and their church sets up a fund," says Dave Du Val, vice president of Taxpayer Advocacy at Taxaudit.com. "Money or furniture given to this cause is a gift in the real world, but in the tax world it's not a gift."
Similarly, say there's a flood in Germany and you have relatives there. You give to the German version of the Red Cross. Although it's a legitimate European charity, Du Val points out that your gift is not tax deductible because it was not given to a U.S.-recognized organization.
And those dollars you drop every week into your church's collection plate? Not deductible either, says Du Val, unless the place of worship keeps a listing for tithing.
You're right. It doesn't seem fair. But then life and definitely taxes often aren't fair.
So go ahead and give to a non-IRS-qualified group if you wish. Just don't claim it on your taxes. That wasn't the reason you were giving anyway.
If, however, you do want to get some tax value from a charitable gift, follow the rules.
And don't feel bad about claiming the tax break. Just because you get a benefit from your generosity, that doesn't diminish your sincere wish to help others.
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