Charitable giving is important year-round, but the holiday season and year-end bring a renewed spirit of giving and sense of bookkeeping urgency. Tax deductible donations are helpful come next year’s tax time, especially if you’re hoping to make a large purchase such as a home in the new year. It’s important to note that deductions aren’t applicable if tracked incorrectly. If you’ve procrastinated and want to make a final push in the days before the year is through, take a look at these tips.
- Keep your receipts– The most obvious way to track your year-end giving is to keep the receipts from any donations you make. Most nonprofits will provide you with a receipt for donations, just remember to ask if they haven’t provided you with anything.
- Keep records– A shoebox filled with donation receipts is a wonderful thing to keep, but it isn’t the only way to organize deductions. Whether on a paper ledger or your personal bookkeeping software, it’s important to keep your own records throughout the year. This will make tax time smoother and leave less room for error.
- Know the differences for non-cash donations- Giving a monetary gift to your church or favorite charity is one thing, but another important way many people give is by donating non-cash assets. If you donate a car or other large item, these are tracked in a different manner versus the bag of clothes you send to a thrift shop. Knowing the difference will help you to deduct everything properly in the coming year.
o Non-cash donations under $500– (this covers household item donations and clothing) you will need a receipt and written confirmation of the charity’s name, the date, and their location.
o Non-cash donations from $500-5,000– You’ll need the receipt, written confirmation, plus a document that explains how you came to own the donated item. Outlining whether it was a gift, purchased, or inherited.
o Non-cash donations for more than $5,000– You will need to have a receipt, confirmation of the charity’s info, an explanation of how you came to own the item, along with a written appraisal from a professional noting how much the item is worth.
- Use tech to your advantage- There are apps available to help you track and calculate your family’s deductions. TurboTax ItsDeductible is a great one, along with Goodwill’s Receipt Builder.
- Organize before the new year– Charities aren’t able to give you a receipt with the date stamp following December 31. Spend the final week of the year tracking and organizing your deductions to ensure you have the proper documentation for this past year’s giving.
- Call your accountant– If you’re unsure you’re tracking your donations correctly, speak with an accountant or other tax professional. Many nonprofits will also direct you through the proper way to track and deduct the gifts you give. Ensuring as little error as possible helps you to know your taxes are in good order.
We hope these tips make it easier to track and deduct your generous donations to charities this year. Here at the Ferzoco group, we wish you and your family a healthy and happy end of 2018 and the beginning of 2019!
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