As you are wrapping up your financial year, you want to make sure to maximize any tax savings you can. That means harvesting your tax losses in your portfolio, paying your mortgage for January of next year in December to get the interest deduction, and donating to charity. You normally have until December 31st to donate to your favorite charities and non-profits for a tax deduction, but be sure to check with your specific charities first.
A Last Minute Donation Checklist
Here’s a checklist to help you get through the hectic end of the year while still grabbing those tax deductions.
The IRS watches your tax deductions and charity donations as part of the audit flagging process on your tax return. You want to make sure you aren’t claiming an abnormal amount of tax deductions. If you do have a lot of deductions due to a lot of charity work in the year — and really, even if you donate just a normal amount — having solid documentation around your charity deductions is key. The documentation needed depends on what you are donating to the charity or non-profit organization. If you’re donating…
- Money: Whether you’re giving cash, a check, or donating via credit card like some charities allow, you need to get a written or printed receipt of your donation. If you give regularly throughout the year many organizations will set up a profile for you in their accounting system and provide you a year end statement of giving. Be sure to check it against your records so that all of your donations count as deductions.
- Items: Claiming a proper deduction amount for the items you donate is key to not getting in trouble with the IRS. Just because an item is priceless to you doesn’t mean your Mom’s coffee cup is worth $20. The government puts out a list of donated item values every year as tax season begins. Use it as a guide. Also, make sure you not only get a receipt, but take photos of the items you donate just in case you do get audited and need proof an item was an excellent condition.
- Securities: You can donate securities to charities, but there is proper paperwork that needs to be filled out. You will need this documentation to file your taxes correctly and to get the proper amount of tax deduction.
Other Donation Tips
Looking to cut your taxes even further? Use these tips:
You can deduct mileage for any legitimate time spent volunteering for a non-profit. The IRS consistently updates the mileage rates for all types of driving. This year charitable driving can be deducted at 14 cents per mile. It might not be much, but every little amount reducing your taxes helps.
Is the Standard Deduction Better?
As you are doing all of your calculations for your deductions, make sure you won’t benefit from just taking the standard deduction first. It doesn’t do you any good to have $3,000 in donations when you could take the $5,700 standard deduction for singles.
Photo by Avi Tzurel via Flickr