With the holidays around the corner, you may want to make a donation to benefit a charitable organization.
Why is this important? According to the National Institutes of Health, "participants who chose to donate a portion of $100 they were provided enjoyed activated pleasure centers in the brain and showed that donating money simply makes you feel better."
And who doesn't need to feel better during the hectic holiday season, while you're learning new skills, or beginning a new career (making assumptions there).
In addition to helping others, you may benefit beyond just feelin' good! That’s because taxpayers who donate to a charity may be able to claim a deduction for the donation on their federal tax return. Check out the rules below.
1. Qualified Charities
You must donate to a qualified charity to deduct your contribution. Gifts to individuals, political organizations, or candidates running for office are not deductible. To check the status of a charity, taxpayers can use Exempt Organizations on IRS.gov.
2. Itemize Deductions
To deduct charitable contributions, you must file Form 1040 and itemize your deductions. To do this, you must complete Schedule A, Itemized Deductions. You file this form with your tax return. Don't know what a 1040 is? or a Schedule A? You should! Once you begin your career, you'll need to file a tax return. Get to know this info now.
3. Getting Something in Return
You may receive something in return for their donation. This includes things such as merchandise, meals, and event tickets. However, you can only deduct the amount of the donation that’s more than the fair market value of the item you received. To figure that out, you subtract the value of the item received from the amount of your donation.
4. Type of Donation
For donations of property instead of cash, a you can only deduct the fair market value of the donated item. Fair market value is generally the price you would get if you sold the item on the open market. If you donate used clothing and household items, those items generally must be in good condition. Special rules apply to certain types of property donations, such as cars and boats.
5. Donations of $250 or More
If you donate $250 or more in cash or goods, you must have a written receipt from the charity. The statement must show:
- The amount of the donation.
- A description of any property given.
- Whether you received any goods or services in exchange for your gift, and, if so, must provide a description and good faith estimate of the value of those goods or services.
Itching to learn more? You should be. Because it's cool to know more than your friends!
You can also use the Interactive Tax Assistant, to see if you can deduct the contribution. This tool helps determine if charitable contribution is deductible. You can also take a look at the charitable contribution tax topic.
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