The recent response to hurricane relief efforts demonstrates Hoosier generosity in action. It doesn’t take a natural disaster for most of us to donate to charities and worthy causes we believe in; however, when it comes to tax time, many clients don’t track their giving accurately and may be shortchanging themselves in terms of deductions.

If you plan to claim charitable deductions, you’ll need to do so by itemizing them on a Form 1040, Schedule A. Here are some important details to keep in mind:

Keep Receipts for Accurate Deductions

Legitimate charitable organizations provide receipts for monetary contributions as well as donated goods.  In the case of organizations such as Goodwill, Salvation Army, or other entities that accept household items, it’s important to make an accurate account of the items you’ve donated. Many, such Goodwill,  provide online valuation guides so you can determine a true value.

For example, here is Goodwill’s online calculator at: https://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf

Many times, a client estimates a value for a bag of clothing rather than knowing exactly how many items were truly donated. Without the record, it’s difficult to know how much they may be under-estimating the true value of their donation.

Not All Good Causes are Deductible

There are a lot of organizations asking for donations that aren’t tax deductible. For instance, a lot of police and fireman’s organizations sound like a charity but are not. While they raise money for things like gift baskets or scholarship funds, you’ll see a disclaimer on the receipt that your contribution is not tax deductible.

If you don’t ask specifically, the callers won’t disclose that the donation isn’t deductible. If you have a question about a charity, you can check the IRS website:  https://apps.irs.gov/app/eos/mainSearch.do;jsessionid=dkO53AVkrzzOJ91rIacyKA__?mainSearchChoice=pub78&dispatchMethod=selectSearch

Cookies, Popcorn and Other Goodies are Sometimes Deductible

If you stock up your freezer every spring when the Girl Scouts are selling cookies, that purchase doesn’t count as a donation. However, if you purchase cookies or popcorn or other goodies and ask the seller to donate to the troops, a food pantry, or other charitable recipient, ask them to specify that you did not receive a product on your receipt.

If you receive some sort of gift or item as a thank you for your contribution, you may only deduct the amount that exceeds the fair market value of what you received (such as tickets or merchandise).

How to Document Cash Contributions

If you donate cash, a check, or text a donation, the IRS requires documentation in order to deduct that contribution. You’ll need to provide a bank record, cancelled check, payroll deduction record and in the case of text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the organization, the date and amount of the contribution.

Making a practice of keeping track of your donations throughout the year will make tax prep easier next year. You won’t hold up the progress of preparing your return while you hunt or estimate exactly what you donated.

If you have questions about what contributions are deductible, you can check the IRS website: https://www.irs.gov/newsroom/irs-guidance or call us at LWG. We’re happy to help you in or out of tax season.