Lower Your Tax Bill with Charitable Donations

By Teresa Ambord

Charitable donations are a great way to lower your tax bill. Even as the New Year's Eve ball falls on Times Square, you can still make a donation that will be deductible for the current year, as long as you make your donation with a credit card. Obviously the donation won't actually be paid until after New Year's, but as long as you commit to it by December 31st, it is deductible. The same applies for checks you mail in time to be postmarked by December 31st.

As all things that come out of the IRS, there are limits that apply.

  • First, because the way the tax law is written, only people who itemize their deductions (file long form) end up being able to claim charitable donations on the income tax. That means about two-thirds of taxpayers will be barred from taking this benefit. The good news is, lawmakers are currently trying to pass legislation that will widen this window of tax benefit to a great many more taxpayers.
  • Other limits are more generous. You may donate cash and property up to at least 20 percent of your adjusted gross income, and possibly up to 50 percent depending on the type of property, and the organization to which you are donating.

Before You Donate.

You should know, there are many organizations that are tax-exempt, but the donations you make to them are not tax-deductible to you. The difference lies in the activities of the organization. For example, political campaigns do not pay tax on contributed funds, but if you contribute to them, you need to do so for ideological reasons, because you cannot count the donation as charitable for tax purposes. Many charities solicit funds over the phone. It is not uncommon for a representative of a charity to tell you that your donation will be tax deductible, when, in fact, it isn't. Some experts advise that you never make donations in response to phone solicitations anyway. But if you are interested in the organization and want to donate, ask them to send you literature stating that they are qualified to accept tax-deductible donations. Then, if you donate, keep that literature with your tax records.

If you're not sure, check out the charity by logging onto:

And here's another caution that is a sign of the times we live in: The IRS has created a list of organizations that are suspected of funneling money to terrorist organizations. If you donate to them, you could possibly be held liable for supporting terrorism. You can see the list of organizations on the IRS suspect list by logging onto this website:

A few things to remember.

  • For single donations of $250 or more, you must have a receipt available with your tax records.not to send to the IRS, but to defend yourself in the event of an audit.
  • For donations of property to organizations such as the Salvation Army, the clerk who accepts your donation will probably ask if you'd like a receipt. Accept it. You'll need to estimate the fair market value of your donated property. Fair market value is the price you could get for the item on the open market. If you aren't sure, go inside the thrift store where you're donating and find articles that compare and use that price.
  • If you are donating property valued at more than $5,000, you will need to have the item professionally appraised. The cost of the appraisal is deductible as a miscellaneous expense.

To see a list of what is deductible and what isn't, log onto this IRS website:





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