Being rewarded with money-saving tax deductions for your charitable giving makes it even better! Find out how to make the most of your
charitable donations in 5 simple steps.
Money Girl
202 MG Five Steps to Get More from Your Charitable Giving
This episode is brought to you by AARP. Ten years from today, Lisa Schneider will trade in her office job to become the leader of a pack of dogs. As the owner of her own dog rescue, that is. A second act made possible by the reskilling courses Lisa's taking now with AARP to help make sure her income lives as long as she does. And she can finally run with the big dogs. And the small dogs, who just think they're big dogs. That's why, the younger you are, the more you need AARP. Learn more at aarp.org/skills. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career, so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. Hi friends, and welcome back to Money Girl's Quick and Dirty Tips for A Richer Life. I'm Laura Adams, your host and the author of the brand new book Money Girl's Smart Moves to Grow Rich. Find the paperback or ebook at your favorite bookseller or online retailer. Charities have really suffered in recent years due to the lackluster economy. That makes this holiday season a great time to dig deep and give what you can to organizations that mean a lot to you and your family. Giving always makes you feel good, and if you make a donation before the end of the year, it might also reduce your tax bill. The IRS rewards generosity with money-saving tax perks for certain charitable contributions. In this podcast, I'll tell you how to maximize your donations and make the most of your charitable giving in five simple steps. Step number one, give to qualified organizations. The first step to maximizing charitable giving is to make donations to qualified organizations. You can give money to any group you like, but you won't be able to claim a tax deduction unless the charity is eligible to receive tax deductible contributions. Most public schools, churches and temples are automatically qualified, but for smaller groups, ask for documentation of their eligibility or look them up online using the IRS search tool. If you mail a check or make a credit card donation by December 31st, you'll make it in time for the current tax year, even if you pay the credit card bill next year. It's important to note that certain donations are never tax deductible, like those to individuals, political campaigns, business associations and for-profit organizations. Step number two, know how much your gift is worth. The second step to making the most of your charitable giving is to know the value of your gift. For a cash donation, it's pretty straightforward because you know exactly how much money you gave, but it gets a little more complicated when you donate property like clothes, household possessions, vehicles or antiques, because you can only deduct an item's fair market value at the time of your donation. By the way, clothes and household items are tax deductible if they're in good use condition only. Another rule is that if you make a donation and get something back for it, like merchandise or tickets to a sporting event, you can only deduct the amount of your contribution that exceeds the value of the benefit you receive. When your non-cash contributions total more than $500, you have to submit IRS Form 82, 83 with your tax return. If your non-cash donation is worth over $5,000, then you're also required to have a professional appraisal, except when you give publicly traded securities. See IRS Publication 561 for more about how to determine the value of donated property. I love learning and anything that makes learning easier. If you're a parent and your child needs some homework help, then Ixcel is a right for your family. Ixcel is an online learning program for kids covering math, language arts, science and social studies. 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Ten years from today, Lisa Schneider will trade in her office job to become the leader of a pack of dogs. As the owner of her own dog rescue that is, a second act made possible by the reskilling courses Lisa's taking now with AARP to help make sure her income lives as long as she does. And she can finally run with the big dogs and the small dogs who just think they're big dogs. That's why the younger you are, the more you need AARP. Learn more at aarp.org/skills. Earning your degree online doesn't mean you have to go about it alone. At Capella University, we're here to support you when you're ready. From enrollment counselors who get to know you and your goals to academic coaches who can help you form a plan to stay on track, we care about your success and are dedicated to helping you pursue your goals. Going back to school is a big step, but having support at every step of your academic journey can make a big difference. Imagine your future differently. at Capella.edu. But what about donating something intangible to a qualified organization, like your time? For instance, let's say you make 100 cupcakes for a church bake sale that's 50 miles away. If the church doesn't reimburse you for the cost of the cupcake ingredients or your cost to deliver them, then those expenses are tax deductible. You can deduct your actual out-of-pocket vehicle expenses, such as gas and oil, or you can use a standard mileage rate of 14 cents per mile to figure your contribution. You can also deduct the cost of tolls and parking fees on top of the 14 cent mileage rate, but you can't deduct general vehicle maintenance expenses, the cost of auto insurance, or the value of your time to bake the goods and drive them to the church. Step number three, itemize your deductions. The third step to maximizing your charitable giving is to do something called itemizing on your tax return. If you don't itemize your deductions, you can make thousands of dollars of charitable donations, but they won't be tax deductible. Here's how it works. Every year, you have the option to claim a standard tax deduction for your filing status or to list out your deductions individually on Schedule A of IRS Form 1040. When the total of your allowable deductions exceeds the standard deduction, you'll come out ahead by itemizing. You can refer to Schedule A for a complete list of allowable deductions. However, if your total deductions don't add up to more than the standard deduction, your charitable donations may bring you lots of good karma, but they won't bring you any tax benefit. So remember that you have to itemize your deductions on Schedule A to be eligible to deduct charitable contributions. Step number four, understand annual deduction limits. The fourth step to maximizing a charitable donation typically comes into play if you make a large gift. That's because donations can't exceed annual limits based on your income. For instance, donations of cash are deductible up to 50% of your adjusted gross income only. However, the good news is that if you get an unexpected windfall and make a generous donation, you can carry over excess amounts and claim them in the following five tax years. Step number five, the final step to making the most of your charitable giving is to keep good records. Donations of $250 or more must have supporting documentation that includes the charity's name and the description, date, and amount of the gift. It's a good idea to always get receipts for your smaller donations too, so no deduction falls through the cracks. If you have questions about making charitable donations, it's smart to get advice from a qualified tax professional, so you always make the most of your giving. I'm glad you're listening. Cha-ching! That's all for now, courtesy of Money Girl, your guide to our richer life. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career, so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. [BLANK_AUDIO]