Many of us have at least one organization or non-profit that we donate to during the year, so when tax season comes around, we may be wondering how we can deduct those donations correctly, and effectively.
In general, if you have donated to an organization that has been listed as a 501(C)(3) with the IRS and you have received anything in return, your donation can be tax-deductible.
Make sure it’s a 501(C)(3)
This isn’t to say that you can’t donate to organizations that aren’t a 501(C)(3). Many reputable and worthwhile organizations are 501(C)(6), but these donations are not tax-deductible. Generally, 501(C)(3) organizations are not involved in political activity or lobbying. They will be listed with the IRS, and their designation will be readily available either on their website or on official documents.
Make sure what you’re donating is tax-deductible.
Your time is precious, but your time cannot be deducted. The tickets you bought to that fundraiser that included a nice meal and an open bar are not deductible. But the gas you spent on the way to donate your time is, for instance. Make sure you understand what is and isn’t deductible before you file.
Make sure you get a receipt.
Even if it feels uncouth or is a hassle, make sure you get a receipt for those donations that you make to 501(C)(3) organizations. Whether it’s in the form of cash, in-kind, stock, items, etc., and get the date, the amount of the donation, and also make sure it notes that you received nothing in exchange. Also, these rules especially apply if the cash donation is over $250, and if your non-cash donation is over $500, you will need to fill out a form. If it’s over $5,000, you will need to attach an appraisal.
Make sure you’re counting donations made in the year you are filing for.
While tax day may not be until April (or later recently), the donations you are listing as deductions need to have been made in the year you are filing for. I.E., when you file your 2021 taxes in 2022, the donations must have been made in 2021.
Know when to itemize
That really is the question! Suppose you are planning on itemizing to capture those donation deductions and other itemizable items. In that case, you may find that taking the standard deduction may still net you a larger benefit tax bill or refund. Also, you or your accountant may want to take into account the CARES Act. For 2020, if you chose not to itemize, you could deduct $300. For 2021, those who file jointly can expect a $600 deduction, so make sure you keep this in mind when deciding whether to itemize or take the standard deduction.
When you are choosing who you would like to donate your time, talents, and treasure to, a little housekeeping and bookkeeping can save you some headaches come tax season.
When it comes to taking donations, Sleep In Heavenly Peace has always prioritized using the gifts that we receive where they are needed most: to get kids off the floor and into a bed or their own. We encourage you to learn more about how we use your donations, here, and then consider partnering with us to help provide children with a safe place to lay their heads!