It’s the holidays, and that means—if you’re like most people—you’ll probably be looking to increase your charitable donations. And while your primary reason for giving might be to support a cause you care about, it’s also true that charitable giving comes with many tax benefits.
But charitable giving can be risky. It’s possible to make gifts that are not tax-deductible, or the charity of your choice might not be using your funds in the way you intended them to be used. With a little planning and research, however, you can take full advantage of the tax benefits associated with charitable giving while also helping the causes you care about most.
Below are three ways you can maximize your charitable donations and deductions this holiday season:
Donate to registered charities.
Charities are required, in most states, to be registered. The process for registration may vary, but it is probably a good idea to check with your state’s secretary of state or Department of Justice office. This shouldn’t be too hard, as most of these offices provide the public with searchable online databases.
At the federal level, charities are also required to file with the IRS as a nonprofit. Any charity that you donate to should be able to provide you with a receipt that has a nonprofit tax ID number.
If your charity is not registered as such, then you may not be able to deduct your gift from your taxes. And if you unknowingly try to deduct your donation, then you may have to pay fees and interest to the IRS.
If you volunteer, include your volunteering expenses.
Unfortunately, you are not allowed to directly deduct hours of donated labor. You can, however, deduct any expenditures you’ve made while volunteering. For instance, if you bought supplies or paid for printing services, then you might be able to deduct those expenses from your taxes.
And if your volunteer work involved lots of driving, you may be able to deduct those miles. The IRS maintains a standard mileage rate, and if you keep track of how much you’ve driven, you can reap the tax benefits.
If you’re looking to deduct your volunteering expenses, be sure to keep all your receipts. If the IRS has any questions about your deductions, then your receipts will go a long way toward answering any of these questions.
Make sure your charity has a good track record.
While it’s unfortunate, some charities have high administrative and overhead costs, which means your donation might be used to cover those costs as opposed to helping the cause they stand for. Not to worry, though. There are plenty of online tools, such as Charity Navigator, that let you research the organization to see how much of your money is going to the charitable cause and how much is going to cover operating costs.
Need help planning your charitable giving this year? Let’s talk about it. Contact us at Baacke Insurance Services for more information. We can help you analyze your goals and develop a plan. Let’s connect today.
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