charitable Donations

All You Need to Know About Charitable Donations

We all love to support our favorite charities throughout the year. Donating to charity is a great way to give back to our communities, and receiving a tax break for doing so is a welcome bonus.

What you donate and the manner in which your donations are made impact how the IRS treats your charitable donation. We’ve put together a guide to tell you all you need to know about making charitable donations and when donating to a charity qualifies you for a tax break.

When can I deduct my charitable contributions?

You must itemize your deductions in order to receive tax benefits for any donations you’ve made throughout the year.  In 2019, the standard deductions are $12,200 for individuals and $24,400 for married couples filing jointly. This means if you don’t have mortgage interest and state and local taxes in excess of those amounts, you most likely won’t see a monetary benefit from donating.

How much money will I save?

The tax break you receive depends mostly on what tax bracket you’re in. For instance, if you are in the 32% tax bracket, you will save approximately $32 for every $100 you donate. Of course, everyone’s situation is different, but your accountant can guide you through the process.

What counts as a donation?

Money (cash is king!) or goods can get you a tax deduction but each type of donation has its own special rules. You can also donate business property, stocks, and retirement funds, though these have very particular rules and we suggest you get in touch with us before initiating any of these transactions. You can’t, however, deduct the value of your time given to a charitable cause, but you can deduct your charitable mileage.

Who can I donate to?

Only donations to qualified organizations can be deducted, so that GoFundMe for the guy down the street won’t count. To verify if an organization is qualified, you can go to IRS.gov/TEOS (you won’t find all churches in this list, but they automatically qualify). Money given to political groups or candidates for public office is not tax deductible.

Donating Cash

You can deduct the amount of money you give to charity less any benefit you receive, so the value of that tote bag, meal, ticket, or other benefit you receive should be deducted from your total donation.

For any donation you make, you should have a record of the amount, date, and the name of the charity. This information can be from your bank or a statement from the charity. If your donation has a goods or services component and is more than $75, the charity should give you a written statement with the amount of the donation and the amount of goods and services. You may only deduct donations of $250 or more if you have a record from the charity given around the same time.

Noncash Contributions

Donating noncash items, such as clothing and household goods, counts towards your charitable giving. The number one thing you have to do is keep records of what is donated, the value of the item, and what you paid for it. Depending on the total value of items you donate to a charity, you may need a statement from the charity. And if your total donations for similar items are over $5,000, an appraisal is required. In some cases, selling the item yourself and donating the proceeds may be a more beneficial solution.

What do we need come tax time

If you have a list of all of your cash donations, that is all we need. If you donated non-cash items over $500, we will request the receipts. If you donated over $5,000 of noncash items, we need to attach the appraisal unless you donated stock to the organization.

TL;DR: If you are going to be making some charitable contributions, it is easiest to make cash-only donations.
When is Working from Home a Tax Deduction_

When is Working from Home a Tax Deduction?

When is Working from Home a Tax Deduction?

The most recent changes to the tax laws stipulate that the home office deduction is no longer available for employees.

If you are self-employed or an independent contractor, you might qualify for the deduction if you can pass two tests:

  1. Regular and exclusive use: You must regularly use part of your home exclusively for your business.
  2. Principal place of your business: You must be able to show that you use your home as your principal place of business. If you have another location and you ALSO use your home to substantially and regularly conduct business, i.e. meet with clients, it may be deductible. If you have a separate free-standing structure that is used exclusively and regularly for your business, it does not need to be your principal place of business.

If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.

Examples: You have an office where you meet your clients for appointments, but you also use your home office to do admin work. Use of your home office would be considered only “appropriate and helpful” and, as a result, not be tax deductible.

TL;DR: If you pass the two tests, you should take the deduction – though it is hard to pass the tests if you are renting another office space.
When is Mileage a Tax Deduction_

When is Mileage a Tax Deduction

When is Mileage a Tax Deduction?

There are only three times when mileage qualifies you for a tax deduction.

Medical Mileage: 20 cents per mile

Miles driven for medical purposes are deductible on Schedule A. The miles you drive to the doctor’s office, pharmacy, and hospital count. However, you only qualify for this deduction if your medical expenses exceed 10% of your income in a given year.

Charitable Mileage: 14 cents per mile

Miles driven for charitable purposes, such as donating goods or while volunteering, are deductible on Schedule A. So if you are volunteering for a non-profit to pick up garbage, the miles you drove to the worksite are deductible.

Business Mileage: 58 cents per mile

Miles driven between worksites, to client meetings, or to pick up supplies are deductible. This does include traveling to/from continuing education and seminars. These are only deductible if you are self-employed or an independent contractor. If you are a W-2 employee these miles are no longer deductible.

Commuting Mileage: NOT DEDUCTIBLE

Commuting from your house to your office is not deductible.

How do I deduct mileage?

If you want to take the mileage deduction, you need to log all of your trips that you want to deduct. You log should include the date, destination, miles, and the reason for the travel. We ask for your total miles, your business miles, and your personal miles for your tax return. You should also write down your odometer on 12/31 or January 1st each year.

There are a variety of apps to keep track of your mileage but most tend to cost between $3 to $10 a month. Unless you are driving more than 20 miles a month, you won’t break even in software costs.

TL;DR: Keep a mileage log if you want to take the mileage deduction.