With the holiday season in full swing many charitable organizations are reaching out to people seeking charitable contributions. Charitable contributions are a great way to reduce your taxable income, while giving to those organizations that are in need. Below are a few things to remember during this season of giving:
Before donating to any charitable organization it is important to do your research. A donation is only deductible if it is given to a qualified charitable organization, as determined by the Internal Revenue Service. The Internal Revenue Service has an on-line search tool available that allows you to select an exempt organization to view their federal tax status and filings. This will provide you with information as to whether an organization is eligible to receive tax-deductible charitable contributions amount other things.
Both of the above websites gather information and publicize it for the public to learn more information about nonprofit organizations.
So, now that you have decided which organization to contribute to, it is important to consider what type of donation you would like to make. Unrestricted charitable contributions are donations that are available to the organization to use toward any purpose. This type of contribution can be used by the organization toward general operating expenses, or for expenses that are incurred from carrying out its charitable mission. A restricted charitable contribution must be used for a specific purpose or project. If you choose to make a restricted contribution, the organization must administer the gift in accordance with your specifications. An example of a restricted gift would be a contribution to a particular scholarship fund at a university.
Money is not the only contribution that charitable organizations are seeking to carry out their purpose. Many organizations are also interested in individuals donating their time and talents to their organizations. There are countless ways to donate service to organizations. Some examples of these would be to serve food at a local soup kitchen, read to school children, tutor children after school, etc. Although the value of your services is not tax deductible, some out-of-pocket costs incurred while doing this service work may be deductible (subject to the deduction limit that applies to charitable contributions).
Feel free to contact us for more information regarding the above information.
Happy Gift Giving!
By: Kristin Metzger, CPA