As the popular saying goes, it is always better to give than receive. When we make donations to charitable organizations, we never expect anything in return. However, charitable contribution deductions can apply towards your income tax return every year. There are several aspects to take into consideration, though, in order for our donations to be valid.
First, we need to know what kind of organizations will count for charitable contribution deductions. Then, we need to understand the ISR requirements for donations and tax return deductions. We also need to be aware of how much can be reflected on our tax return from charitable contribution deductions.
What Organizations Count for Charitable Contribution Deductions?
Americans give 2% of our income as donations to charitable and non-profit organizations every year. However, when it comes to charitable contribution deductions, we must pay attention to which organization we decide to donate. Since charitable organizations need to register through the IRS, not all charities and non-profits will count against your tax return.
According to Charity Navigator, donations to individuals, foreign governments, foreign charities, and even some private foundations do not count against your tax return. Some examples of organizations that do qualify, however, include religious organizations, war veterans’ organizations, volunteer firefighters, and civil defense organizations.
Are There Any Tax Requirements for Charitable Contribution Deductions?
The first requirement we need to consider is that we must file for itemized deduction in order to qualify for charitable contribution deductions. If we file a standard deduction, then our charitable donations won’t count against our tax return. This means that we will have to list all of our deductions, including items such as mortgage, state, and local tax, medical expenses, along with charitable donations.
Before we start filing our tax return, we should take care of some other procedural aspects. Even before making a donation, we must make sure the organization is a 501(c)(3) private foundation or public charity. In addition, we must keep a record of each and every contribution we’ve made to the organization, so keep the tax receipts they give you. If we made a non-cash donation, we will need a qualified appraisal of the property value.
How Much Will Be Reflected as Charitable Contribution Deductions?
Before talking about how much could be reflected as charitable contribution deductions, we must be aware that there are different amounts of yearly donations to be met. Such minimum amounts will depend on how we are deciding to file our tax return. If we are filing as a single person, or married but filing separately, we should have donated at least $12,000. Filing as head of household, the amount will go up to $18,000. If we decide to file jointly as married, then the amount will go up to $24,000.
Now, depending on our income and tax bracket is the amount of charitable contribution deductions we would be likely to receive. For 2018, the tax brackets remained with a number of seven different tax rates. These tax rates were 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Such brackets will depend on our total income plus the way we are filing our taxes, whether as a single person, a married couple, or head of household. In this case, if someone who belongs to the bracket of 37% made a $20,000 donation, they would see $7,400 reflected as charitable contribution deductions.