Tax Tips for Holiday Donations

It’s the season for giving and with just a short stretch of 2016 left, it’s time for being generous to the people and causes that you care about the most. So, be sure to get those donations in so they’ll count for the year. Whether you’re responding to holiday appeal ads with your credit card or bringing gifts to charity drives, here’s some tips you should keep in mind for deducting these donations.

In order to be tax-deductible, your donation needs to be made to a qualified charity.

If the charity is a qualified 501(c)(3) organization, your donation will be tax-deductible. This encompasses a majority of non-profits, schools, houses of worship, fraternal lodges, and non-profit hospitals.

Dues for social clubs, civic leagues, and political contributions are not deductible. Because charity scams unfortunately abound during the holiday season, and organizations that seem to have a public purpose are actually not qualified charities, you should take a look at the IRS Select Check database if you are unsure whether an organization is a qualified charity or not.

Gifts made to individuals aren’t deductible.

While donating to a friend’s GoFundMe campaign to help them through a rough patch or giving money to a homeless individual may be good and spiritually rewarding deeds, the money you give in both cases is unfortunately not tax-deductible. 

If you’re making a non-cash donation, you need to keep a record of your donation’s approximate value.

Cash isn’t the only way to give. If you’re donating goods like clothing or toys to qualified charities holding drives, you can deduct the market value of the goods. If you just purchased a toy for the drive, the amount you paid should suffice. Auction sites and thrift shop guides can help determine market value for older clothing and household items donated to drives and charity thrift shops. If you’re donating high-value goods such as collectibles or art, you should have it appraised. An appraisal is required for donations valued at $5,000 or higher and the appraisal fee is deductible in either case.

If you are mailing goods to a qualified charity, your postage is also deductible.

You can deduct expenses related to volunteer work, but not the value of your services.

Many qualified charities need volunteers during the holiday season. If you enjoy volunteering, you should keep track of your expenses incurred when doing charitable work, such as supplies and uniforms.

Travel is also deductible including taxis, airfare, and public transit. You can also deduct $0.14/mile using your own vehicle.

However, if you perform services for a charity, you can’t deduct the market value of your services. For instance, if you charge $150/hour for technical consulting and you do three hours of work for a charity you aren’t entitled to a $450 deduction.

Rue & Associates is happy to answer any questions and concerns you have about charitable donations, holiday giving, and tax impacts of volunteer work. Please contact us and give us a call today to speak to one of our tax law experts.