Are you familiar with the saying “It is better to give than to receive?” Helping someone less fortunate than ourselves gives us a warm feeling inside and reminds us to be thankful for what we have as well, but it is also the right thing to do! And being able to receive something without feeling the need to give in return is just as important.
We all experience the cycle of giving and receiving. In fact all beings on the planet are connected to one another through this cycle. We all maintain our very own special place, which adds to the overall harmony of life. We are constantly in the process of giving or receiving something, whether it is material, energetic, action-oriented, or even thoughts. This act of giving and receiving is an integral part of the natural progression of life. It is interesting to think about what and how we give and receive in our life.
However, there are times when giving to others--and here I am referring to financial giving--is truly better than receiving. With the drastic budget cuts, many charities are struggling so contributions can literally be a lifesaver to them. On the flip side, they can provide the givers with many benefits in return. Not only do you have the satisfaction of knowing that you’re giving to something bigger than yourself, you could also possibly receive a tax deduction from the IRS the next time that you file. So it's definitely a win-win situation, and something to seriously consider!
Here are some tips on how to make the most of charitable contribution(s), while staying on Uncle Sam’s good side:
Make sure beforehand that contributions can be considered tax-deductible. Are there any gently used clothes in your closet that you aren't wearing anymore? Are you eager to donate money to a great worthwhile cause? The good news is that charitable contributions can help to lower your tax bill, provided that your targeted charitable organization is eligible to receive tax-deductible contributions. Be sure to give to organizations that are listed as a 501c3.
Determining The Value of Your Donation(s). When giving away items to a charity, deciding how much to deduct is not always easy, especially when you're donating something other than money.
--First things first: try to make an itemized list of what you're donating and their condition; also, it can't hurt to take pictures of those items!
--Once you've done that, you should figure out how much your donations are worth. You can do this by determining the fair market value; this is the amount that typical buyers would actually pay for that item, taking into account its age and quality. Some charities publish guides to help you determine the amount of a charitable tax deduction(s).
Keep any records of all donations! If you donate clothes, money, or any other property, keep some type of documentation that confirms receipt of your donation from the qualifying charity.
For money donations under $250, get a charity receipt, bank record, credit card statement, or cancelled check. For any amount over $250, get an acknowledgement letter from the charity listing the amount you donated and the date it was donated. If your donated property is worth more than $5,000, you’ll probably need a written appraisal.
To itemize ... or not? If you plan on itemizing, or listing your deductions separately, the best thing to do is file a 1040 form and then fill out a Schedule A.
If you know 100% that you won’t be itemizing, don’t worry about donation receipts. But if you aren’t sure, your best bet is to keep records of all your receipts throughout the year; you may want to file them in a folder as soon as you make the donation. If you're not sure about which option to choose, don't worry: you can always consult a tax professional!
So, if you’re planning to make any contributions or donations in the coming year, just remember: charitable giving is good for the soul; but come tax time it can also be good for your wallet!