It's that time of year again. The season of giving. The most joyous time of the year. The time of year when even the most Grinch-iest of hearts tend to grow three sizes. Now, if you don't pay much attention to nonprofits throughout the year or haven't found one you are passionate about yet, now is a great time to get involved. An involvement that can also be shhhhhh "tax deductible".
Sure, many nonprofits receive government grants and support. However, as a bookkeeper who works with nonprofits and is the founder of her own it's not always enough. Grants and government support is also not reliable and can change from year to year or term to term. Meaning nonprofits heavily rely on individual outside donations and assistance from their supporters. There are many ways to give to a qualified charity or nonprofit. Here are all the ways you can better the world around you and become a part of change this holiday season:
Monetary
Make financial donations by check, debit card, or credit card. These payment methods can help you keep record of your donations. They can also protect you from charity scams.
Goods and Personal Property
Some charities accept non-cash donations, such as clothing and household items. Donate items that are in good (or better) condition. Keep a list of the items you donated, for your taxes.
Vehicles
You can donate your car, truck, boat, or other vehicle to a charity. An organization may give a donated vehicle to someone, use it for operations, or sell it at auction. If you donate a vehicle, you will need to transfer the title of the vehicle to the charity. Also, remove license plates and registration documents before you donate the car.
Other Property
You may also give other types of items to charities such as:
Art
Jewelry
Stocks
Real Estate
Patents
The value of these items may need an expert appraisal. The values could depend on offers to buy the items and the timing of the donation.
Federal Tax Deductions for Charitable Donations
Like mentioned above you may be able to claim a deduction on your federal taxes if you donated to a 501(c)3 organization. To deduct donations, you must file a Schedule A with your tax form. With proper documentation, you can claim vehicle or cash donations. Or, if you want to deduct a non-cash donation, you'll also have to fill out Form 8283. Reach out to your tax professional to confirm and ensure you are filing the correct forms and have all required documentation.
I recently covered the new 2021 tax deduction increases for charitable contributions on my Home Bookkeeper YouTube channel. On this channel I share insightful videos on bookkeeping, businesses ownership and overall finance in a fun and creative way. If you enjoy that style of content I hope you subscribe to stay tuned for more videos to come.
You'll Want To Keep Records of Charitable Donations
To claim deductions, it’s important to keep records of your donations to charities. You may not have to send these documents in with your tax returns, but they are good to keep with your other tax records in the event of an audit or request. Common documents include:
Written acknowledgment of vehicle donations
Bank records or a written acknowledgement for cash donations
Form 8283 for non-cash deductions
Federal Tax Deductions for Small Business Charitable Donations
Small businesses can also receive a tax deduction for making a qualified charitable "cash" donation. This is why you see so many businesses sponsoring a neighborhood sporting team, a park or playground equipment, or showcasing a cause important to them on their website.
The IRS has specific reporting requirements when a small business donates:
Non-food inventory
Food
Intellectual property
You won't receive a tax deduction for donating services. But you may be able to deduct expenses related to the donation, like travel or materials. For example if an auto service shop donations oil changes to a nonprofit's fleet of vehicles. The time spent can not be deducted, however, the cost of goods used an be. As always make sure to check in with your tax professional, bookkeeper, or reach out to Edj Consulting Group for assistance.
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