Many people throughout New York take part in charitable giving. For instance, you might donate unwanted clothing to a local charity. You might also be someone who gives away millions each year to charitable organizations. Besides helping those in need and making you feel good, charitable giving can be rewarding during tax time.
When to keep receipts
Most charitable organizations accept donations of varying amounts of money. Some organizations accept donations in one of several preset amounts. Others let you choose how much money you’ll donate. But, you’ll need to keep a receipt for donation if it’s for more than $250. Generally speaking, keeping your donation-related receipts year-round is a good rule to follow. Keeping your receipts stored safely also eliminates confusion as you file your taxes.
There are limits to donations
It’s also imperative to know you can only donate so much money. The Internal Revenue Service (IRS) bases donation limits on your adjusted gross income (AGI). As a rule, the IRS limits donations once they reach 60% of your AGI. If your AGI was $200,000, you could donate no more than $120,000.
Understanding what qualifies as charitable organizations
It’s easy to feel confused about trusts, charitable giving and tax planning. Some of this confusion comes from what qualifies as a charity. Fortunately, the IRS lists its criteria for what qualifies as a charitable organization. For instance, donating money to loved ones won’t count as donations you can use as deductions. Your contribution must go to a tax-exempt organization, such as a religious organization, museum, or other qualifying organization.
Knowing how donations impact your taxes could prevent you from leaving lots of money on the table. Understanding the tax deductions you qualify for helps you maximize your charitable giving in the future.