We’re two months into 2016 and that usually means one thing for most of us: time to start dealing with taxes. But as you are putting last year’s taxes to rest, it is also time to start pre-planning how you will handle next year’s taxes so you don’t have to pay out quite so much when April 15th rolls around again.
One way you can do this is by getting your charitable donations taken care of early before the end of year rush starts. You can start now so you’ll kill two birds with one stone—your charitable donations and your spring cleaning. Regardless of when you start, though, here is how you can get the most out of your charitable donations.
Do your spring-cleaning.
Let’s face it: most of us have that one room in our house we use to dump all the stuff we don’t use, don’t have any intentions of using, and will probably never use again. That’s why now is the time to start donating all of this to a charitable organization.
Even if the items you donate will not be useful to the less fortunate, the items can still be sold at a charity thrift shop to provide money and support for those who need it. So this spring, don’t just box it into plastic storage bins and shove it in the garage. Separate a good bit out and donate it to the charity of your choosing so you can reap the financial benefits during next tax season.
Research the groups in your area.
Once you have decided to donate items (or even cash) to your local charities, it is important to find out all that you can about them. Look for basic information such as their name and contact information as well as how the group will use your donation. If you can’t find out this information, you should probably move on to another group.
Any charitable organization should be happy to provide you with info regarding how your donation will be put to use. Also, be sure to do some search engine research using the name of the organization in addition to the word “scam” or “fraud.” If the organization is not above board, this will give you some information to make an informed decision. Check with the local Better Business Bureau to find out if there are any complaints against the charity.
When you make a donation, there are two basic forms that you are looking at: property donations and monetary donations. If you plan to donate money, then make sure you pay by check or credit card. If the company only deals in cash donations, then that should be a warning sign something isn’t right.
If you plan to donate property, make sure it is in good working condition or good repair. No one wants your broken stuff that will just clog up the charity’s resources as they chuck it in the garbage for you.
You may want to consider donating your old cars. If you have a vehicle you no longer drive, you will find that donating it to a charity is probably easier than selling it or trading it in. But the other bonus is that you will probably get more in terms of donation value than you would if you tried to sell it or trade it in at the local car dealership.
The most important thing when it comes to donating items to charity is to always get a receipt. Some charities will provide you with an itemized receipt of every single thing you donated and the value for each item. Others will provide you with a “general receipt.” If the latter is the case, be sure to keep an itemized list of everything you donated for tax purposes. You’ll find the IRS has a guide to how to estimate how much your donation is worth. Follow this to the letter so that you don’t have to worry about audits or tax liabilities later on.
Make your claim.
When you make a claim on your income tax returns, there are a few things to remember. First, you can only deduct up to half of your adjusted gross income. However, if you donate more than that, you can carry over the extra for up to five years.
Also, make sure the charity qualifies as a nonprofit organization. Not all are tax deductible, which is the case with political action groups, for example. When you actually file, use Form 1040 and itemize your deduction on Schedule A. If the donation is worth more than $500, then you will need to file Form 8283 in addition.
Charitable donations are a great way to not only help out others, but to help yourself when the tax season comes around. With that in mind, do some due diligence with research and make sure that you get the most out of your donation.