Smart TaxesSmart Taxes

Not all charitable contributions are deductible

For tax savings, you have to itemize, give to qualified charities and save receipts.

By Jeff Schnepper Mar 8, 2010 4:19PM

Here’s something I’ll bet you don’t know -- all your charitable contributions are not deductible.


Unless you itemize your deductions, you get no tax benefit from charitable contributions. You did “good,” and you feel better. But, your taxes are unchanged.


Even if you do itemize, you get no tax benefit unless the contribution is made to an IRS- recognized charity. See Publication 78 for a cumulative list of qualified organizations.


Gifting money to the bum on the street or your old clothes to your poor sister-in-law may be charitable gifts, but they’re not going to reduce your tax.


In fact, if the value of the gift is more than $13,000, you may have to file a gift tax return, Form 709. Because of the $13,000 per person annual exclusion plus the $1 million lifetime exclusion, you probably won’t have to pay any tax. But, the IRS is going to want to see that return.


Even if you donate to an IRS-recognized charity, you will still need substantiation. That means some sort of paper, either a receipt from the charity or a canceled check. Those of you who are throwing cash into church collection plates are making charitable contributions. But, without a receipt, you’re not getting a tax deduction. Sorry.


Picture dead presidents on those receipts. They represent real dollars in your pockets. You wouldn’t walk out of a store without your change. Never leave a donation without a receipt.


And don’t bother with contributions to civic leagues, social or sports clubs, labor unions, chambers of commerce and homeowners associations. They’re not allowed as charitable deductions.


Sorry, neither is the value of your time or services. You really weren’t doing it for the tax deduction, anyway.


But, you do get 14 cents for each mile you run your car for charitable use, and any other out-of-pocket charitable expenses you pay. Just make sure it’s for an IRS-recognized charity and you can substantiate the amount.


Related reading:


Don’t get burned trying to beat IRS

Five ways to avoid an audit

Help charity and make money


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