1. Big “If”: Charitable donations are deductible only if you itemize your taxes. Those who opt for the Standard Deduction can donate thousands in cash and merchandise but not a cent is deductible.
2. Double Check: Itemized deductions can include donations plus unreimbursed medical expenses, various taxes paid and much more. You may find you want to itemize after all.
3. Tax Bracket: The actual cost of your donation is balanced by your tax savings. Simply put: $1,000 donated by someone in the 33% tax bracket only costs the donor $670.
4. Who Qualifies: Most legitimate charities qualify as tax deductible, but watch out for foreign charities and private organizations, some may not. Check with the IRS or your accountant first.
5. High Limits: Most people contribute less than 20% of their adjusted gross income. For public charities, that donation can go as high as 50%, but again check with a professional before cutting a large check.
6. Non-Cash: Old clothes, furniture, etc., is valued at the current market value, or in some cases what the charity actually sells them for (this especially applies to donated vehicles). Don’t over-estimate like Bill Clinton did.
7. Your Costs: Your personal out–of-pocket expenses could qualify, such as if you drove around for Meals On Wheels or performed other errands. Note: These are calculated as a separate “charitable mileage rate.”
8. Stocks, Etc: Don’t want to pay capital gains on stocks or bonds? Donate them and deduct their fair market value. However, because there are many caveats and clauses here, run it by your financial advisor first.
9. Unseen Benefits: Fiscal matters aside, there’s a lot to be said for activating the reward center of your brain. It releases a surge of the positive neurotransmitter dopamine and we can all use a little more of that!