Donating to Charity to Lower Your Taxes
Audio version available here:
Length: approx. 1 min. 30 sec.
Recently, charities have enjoyed higher donations to their causes. However, according to a report from Altrata, the number of actual donors has been shrinking. Referred to as the “‘dollars up, donors down’ phenomenon”, increasing percentages of philanthropy have been led by the super-wealthy.
While this may mean many nonprofits are shifting their focus to “ultra-high-net-worth individuals (those worth $30 million or more)”, some still reach out to a “community of smaller, younger donors”. Regardless, the tax benefits can be of great value to any donor, if they know how to deduct the donation properly.
The first step to deducting donations from your taxes is to donate to the correct organization. Gifting cash to a family member is generous, but does not count as a deductible contribution. Charitable contributions must be made to a qualified charitable organization, such as a 501(c)(3). The IRS has a full list of qualified organizations on their Charitable Contributions Deductions page.
Once you’ve verified the organization you are donating to is acceptable under IRS regulations, obtain a receipt of your donation for substantiation purposes. Depending on the amount and type of donation you make, you may also need an appraisal.
To deduct the donation on your tax return, fill out Schedule A on your Form 1040. If you donated non-cash items exceeding $500 in value, you will also need to fill out and attach Form 8283.
For more details on deducting your charitable contributions, watch our YouTube video. If you are ready to put this deduction into action and file your 2023 tax return, reach out to the XQ CPA team for guidance and assistance. We specialize in maximizing our clients’ tax deductions and refunds and would love to help you.
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