It’s that time of year! The time when we are in the giving mood. The time we are decking our halls and thinking about those less fortunate and what we can do to help.
When giving to Charitable Organizations, please be aware that in order for those donations to be deductible, an organization must be a Eligible Organization registered with the IRS. Just because an organization is asking for funds, does not mean that they are deductible for tax purposes.
So how do you know who is and isn’t eligible? The IRS has an online Exempt Organization Search Tool where you can search the database or download the Extensive (yes, over 900,000 entities) list.
IRS Tool: https://www.irs.gov/charities-non-profits/exempt-organizations-select-check
Master List: https://www.irs.gov/charities-non-profits/exempt-organizations-business-master-file-extract-eo-bmf
Keep in mind, even if the Organization qualifies, you may not be able to take advantage of the donation you make. Here are some general rules:
- First you must be able to Itemize your deductions vs taking the Standard Deduction. Donations are only deductible on your personal tax return if you can itemize.
- If you are an LLC or S-Corp, these contributions will pass thru to the Owners on their respective Personal Tax Returns and are NOT business Deductions. Only C-Corps (entities that are considered independent from the Stockholders) may claim the deductions on their returns.
- Be sure you have written proof from the Charitable Organization for any Contributions totaling over $250 in a calendar year. The Organization is required to provide this to you and you must keep this with your tax records
- If you donate Non-Cash Property (ie Antiques, Paintings, Jewelry) be sure you get an appraisal if your donation has a value of over $5,000.
- You may also donate vehicles but keep in mind, there are special rules that limit you to a deduction for the value that the Organization receives for that donation if/when they sell it.
- Also, it’s important to understand that if your charitable donation is more than 20% of your adjusted gross income, your deductions may be limited.
For additional information, below is the link IRS Publication 526 for detailed information. Or feel give us a call too.