You may choose to give money or donate property to charities. Your donations can be helpful for medical research, relief efforts after disasters, or on-going operations of organizations.
Before you donate money or goods to a charity, check out the organization’s background. Be certain that the organization is actually a legitimate charity. Several agencies and organizations offer tips, databases, and reports that help you evaluate the operations of charitable organizations:
- The Internal Revenue Service offers tax tips for donors and an exempt organization database to determine if the charity is a 501(c)3 organization (the organization must have this number so you can deduct your donations on federal taxes).
- Know the difference between tax-exempt and tax-deductible organizations. Tax exempt means that the organization doesn't have to pay taxes, and tax deductible means that money your donate can be deducted from your federal taxes. Just because an organization is tax exempt doesn't mean that your donation is tax deductible.
- The attorney general or consumer protection office in your state often oversees the licensing of charitable organizations. They may also have records of complaints about charities.
- The Better Business Bureau allows you to access comprehensive reports of many large charities, including charities’ governance, use of funds, and fundraising activities.
Types of Donations
Giving money to an organization is the most common charitable donation. Your money is often used for program efforts and helps the organization achieve its mission. If you give a monetary donation, make the donation with a check or credit card, rather than with cash or by wiring money. This will help protect you from scams and help with your record keeping.
Goods and Personal Property
Some charities accept non-cash donations, such as clothing, household items, or electronics. If you donate these items, they must be in good (or better) condition. Be sure to maintain a list of the items you donated. Also, if you donate a cell phone or computer, make sure to erase all of your personal information, contacts, and sensitive information beforehand.
You can donate your car, truck, boat, or other vehicle to a charitable organization. The organization may give your donated vehicle to a person who needs it or use vehicle for its own transportation needs. Most often the organization sells the vehicle at auction. The charity will use the proceeds for outreach and to fulfill its mission.
If you donate a vehicle, keep in mind that you will need to transfer the title of the vehicle to the charity. Also, remove license plates and registration documents before you donate the car.
You may also give other types of items to charities:
- Real Estate
The value of these items may require appraisals from experts, and can depend on offers to purchase the items, and the timing of the transfer from you to the organization.
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Not all organizations that claim to be charities or help people are reputable. Some scam artists set up fake organizations, taking advantage of the public’s generosity immediately after a tragedy or major disaster. Follow these tips to help you detect common charity scam tactics:
- Check out the charity with the attorney general or the Better Business Bureau before you give.
- Don’t give in to high pressure tactics such as urging you to donate immediately.
- Don’t assume that you can get a tax deduction for donating to an organization. Use the IRS’s database of 501(c)3 organizations to find out if it has this status.
- Verify the name. Fake charities often choose names that are similar to well established charities or use keywords that elicit sympathy, such as “children”, “cancer”, or “disaster relief”.
- Don’t send cash. Pay with a check or credit card.
If you suspect charity fraud, report it to the Federal Trade Commission. Although the Do Not Call Registry doesn’t apply to charities, you can ask an organization not to contact you again.
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Federal Tax Deductions for Charitable Donations
You may be able to claim a deduction on your federal taxes if you donated to a 501(c)3 organization. In order to deduct your donations you must file an itemized federal tax return, along with Schedule A and a form 8283 for your non-cash donations.
The amount of money that you can deduct on your taxes may not be equal to the total amount of your donations. If you donate non-cash items, you can claim the fair market value of the items on your taxes.
If you donated a vehicle, the amount of your deduction depends on if the car is used by the organization or sold at an auction. The IRS’s publication “A Donor’s Guide to Vehicle Donation” explains how your deduction is determined and the documents you must have to claim a deduction.
If you donated money to the charity and you received a gift in exchange, or if part of your contribution paid for a dinner, event entrance, or registration in a race, the entire amount is not tax deductible. Rather, the only part of your donation that you can deduct on your federal income taxes is the amount that is in excess of the value of the gift, dinner, or race.
Keep records of your donations to charities. You may not have to send these documents with your tax returns, but these documents are good to include with your other tax records. Some common documents include:
- Canceled check to the organization.
- Credit card statement showing a payment to the organization.
- Receipt from the organization.
- Annual giving statement from the charity or non-profit.
- E-mail confirmation from the organization.
- Written acknowledgement for vehicle donations.
- Itemized list of the items you donated.
- Vehicle identification number for vehicle donations.
- Signed over vehicle title.
- Phone bill, if you gave a donation through a text message.
- Valuations of stocks, real estate, art, or jewelry donated to a charity.
There are some pieces of information that may be included in receipts and giving statements:
- Name of the organization.
- Date of the donation.
- Amount of the donation.
- Statement that no goods or services were provided by the charity in return for your donation (if that was the case).
- Vehicle identification number (VIN) for vehicle donations.
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