A Tax Savings Guide to the Holidays: Charitable Contributions

Posted by on November 30, 2012
Last modified:
Charitable contributions can get you a tax deduction

Get into the holiday spirit with gifts to charities and you could be gifting yourself a tax deduction

These days the holidays tend to involve lots of buying stuff, partying, and hectic travel. Don’t get me wrong, these activities can all net you some pretty valuable tax deductions as long as they’re done according to IRS rules.

But you can also get a tax deduction by getting into the more traditional spirit of the season, the spirit of giving.

Not only does giving to charity fit in well with the spirit of the holidays, but December also conveniently falls at the end of the year. That means that you can pretty accurately look ahead to tax season and plan your charitable giving (and by extension your deductions) so that you get the biggest possible tax benefit. You may even be able to give enough to charity so that you get bumped to a lower tax bracket.

But in order to get a deduction you have to make your donations to a group recognized by the IRS as a charitable organization. These groups must be nonprofits of a religious, charitable, educational, scientific, or literary nature or they must be involved in preventing cruelty to animals or children.

Just as an example, gifts to the following organizations would count as charitable contributions:

  • churches, synagogues, temples, mosques, and other religious organizations
  • federal, state, and local governments
  • nonprofit schools and hospitals
  • public parks and recreation facilities

But gifts to the following organizations would not:

  • civic leagues, social and sports clubs, labor unions, and chambers of commerce
  • foreign organizations (except certain Canadian, Israeli, and Mexican charities)
  • groups run for personal profit
  • groups that lobby for law changes

The organization you are thinking about donating to will be able to tell you if you can deduct contributions to them. Otherwise you can contact the IRS and they will be able to tell you whether the group is a qualified charitable organization. You can also take advantage of the IRS’s new Exempt Organizations Select Check online search tool that allows you to search for tax-exempt organizations and see information about their federal tax status and filings.

The IRS defines a charitable contribution as a donation or gift to or for the use of one of these qualified organizations. Plus in order to deduct it, your donation must be voluntary and you must not get, or expect to get, anything of equal value in return.

When you file your return, you will have to attach a Schedule A [Itemized Deductions] and fill out the Gifts to Charity section. And, as is the case with all deductions, you will have to keep records of all your gifts to charity.

So give to charity! Not only will it bring joy to your heart, it might just fatten your wallet too.

Photo via Alex G. on Flickr.


This entry was posted on at 4:05 pm and is filed under Tax Deductions and Credits | Blog.

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