A Basic Overview of the Tax Benefits of Charitable Contributions

This Thanksgiving season, it may be useful to remember some of the tax benefits of charitable donations as you contribute to your favorite cause. For a charitable donation to be tax-deductible, it must be made to a qualified charitable organization (a 501 (c)(3) organization). Not all charitable donations are deductible, but taxpayers can deduct up to 50% of their income through charitable donations.

Additionally, taxpayers aged seventy and one half and older may make a qualified charitable distribution (QCD) from their individual retirement account (including a SIMPLE IRA) or Simplified Employee Pension Plan. A QCD can exclude up to $100,000 annually from a taxpayer’s income.

It is also important to note that cash contributions, unreimbursed out-of-pocket expenses related to volunteer work, and gifts of property are deductible as charitable contributions, but the time spent in volunteer work is not.

Taxpayers should keep detailed records of all charitable donations for tax purposes. For donations of at least $250, written documentation containing the amount of money donated or a description of the property donated and a statement that the charitable organization did not provide anything in exchange for this donation or an estimate of the exchanged goods and/or services if anything was exchanged. Donations of property may also require professional appraisal before they can be deducted from income.

See https://www.taxpayeradvocate.irs.gov/news/nta-blog-giving-thanks-giving-tuesday-november-29-tax-benefits-and-charitable-contributions/

See also https://www.irs.gov/pub/irs-pdf/p526.pdf

See also https://apps.irs.gov/app/eos/

Posted by Benjamin Sapozhnikov, Associate Editor, Wealth Strategies Journal.

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