All You Need to Know About Charitable Donations

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.

P.S. Want to learn how to manage your money better as a therapist? Now you can learn directly from Toni Cameron, CPA with our new on-demand webinars! Check out our most popular webinars here.
team (3)

Toni Cameron, CPA

Business Consultant, CFO Services, "The DM"

Toni is an accountant by day and gaming geek by night. As an accountant, Toni’s focus is dedicated to people like you — individuals, nonprofits, and small business owners. Toni’s adamant about taking care of all the things you just don’t have time to because she understands the value of a proper work-life balance.

Leave a Reply

Your email address will not be published. Required fields are marked *


Vector 3 (2) (1)

Ready to start Learning?

Click to view all webinars on-demand.

© Copyright TL;DR: Accounting 2022

Have you heard? You can now watch our previously recorded Webinars On-Demand! Watch Now!